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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.

CONCLUSION

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

any

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.

34-421-64 pt. 1

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.

This is a group of some 86,000 employees, who now must receive the minimum wage, but who are not protected by the overtime provisions, and who are working an extraordinary amount of overtime, and so the proposal is that the overtime provision be extended to cover the filling station employees.

Those, Mr. Chairman and members of the committee, are the groups who would be affected by the proposed legislation.

I should like to say, in summary and conclusion, this: The principal argument which has been directed against the extension of the Fair Labor Standards Act coverage is that it will reduce employment in certain areas.

I am appreciative of the basis of that suggestion. You will know that so much of our time in the Department is taken up with consideration of methods of eliminating unemployment and with increasing employment that the last thing we want to do is anything which will cut down the amount of employment in this country.

I can only say to you that to the best of our analysis, based on the studies which have been made

a number of them at the direction of the Congress, others at the suggestion of this committee-we come to the necessary conclusion, on the basis of the information at our command, that none of this will reduce employment, that if it has any direct effect on employment or unemployment, it will increase employment, or at least that there is no evidence that it will decrease employment, and that it is essential, in our judgment, to carry out the commitment against poverty, to carry out our commitment against esploitation, to bring these wages up to the minimum.

And so I say to you that the proposal will, in our judgment, help provide wages at which people can live, and it will have no effect on reducing employment.

It is our conviction, Mr. Chairman and members of the committee, as I indicated at the outset, that in the interests of the service of our conscience, in the interests of carrying on the business of this country on the fairest, most equitable, and efficient basis, these changes should be made in the present legislation.

Thank you.

Mr. ROOSEVELT. Mr. Secretary, thank you very much, sir, for both your statement and your comments. I think you have presented to us a very factual and helpful statement.

I think we will, of course, as you recognize, have to face some very difficult problems. One of them you touched on slightly.

And because we are a little pressed for time, I am going to try not to make our questions too detailed, but would ask, if there are some parts of this that we may have questions about later, whether we can have the privilege of submitting them in writing to you, and solicit you for comment?

Secretary WIRTZ. We should be glad to do that, Mr. Chairman.

May I say I have here with me today a gentleman who is familiar to the committee, or well known to the committee, but I do want to introduce Mr. Donahue, our Solicitor, and Mr. Merrick, an assistant of mine, who has also been working with the committee, and we shall le glad by written form or in a subsequent session or in whatever way to respond to whatever questions you have.

Mr. ROOSEVELT. Thank you.

I think it would be the understatement of the year to

say

that we are familiar with all these gentlemen, and have been most gratified by our contact with them.

You touched briefly on the tips situation, and you solved it by saying that they should be credited only to the extent that they are reported to the employer, and again paid back by him in the form of wages.

What is our answer to the employer who says that he does not know anything about the tips?

Secretary WIRTZ. We recognize that possibility, Mr. Chairman, and have anticipated it in a form reflected in the proposed legislation.

It will be possible as an administrative matter to work out, in particular cases, what seems to us a fair reflection of that situation. Specifically and illustratively, if a situation of that kind is presented to us, we will investigate it, and may, as we interpret the statute, make an administrative determination as to what treatment should be given tips in that situation.

Just to be specific, if in looking into the situation we find a wage practice such as would warrant the conclusion that tips constitute 15, 10, or 25 percent of the wages, we can make a determination that where the wages are, for instance, 90 cents, there is basis for concluding that a tip factor of 15 percent should be added.

The problem that you refer to is a very real one, and we would expect to face the necessity of working out, administratively, answers in particular cases.

Mr. ROOSEVELT. Do you think there is any justification to the charge that by allowing the tips situation to exist we are encouraging certain types of employment which are referred to as less than completely moral?

The matter was brought to our attention with reference to an organization in which the people giving the service receive practically no wage and therefore are dependent entirely for their remuneration upon the good will of the customer, which leads to, at times, supposedly unfortunate circumstances.

I have said that as diplomatically as I can say it.
Secretary Wirtz. I will answer it as diplomatically as I can.
Mr. AYRES. Will you yield, Mr. Secretary?
He is referring to the Playboy Club.
Mr. ROOSEVELT. You can count on my friend from Ohio.

Secretary Wirtz. Answering in broader terms, limiting myself to the bare facts of the question, I would say that the problem does lend itself to administrative management, and would answer your question as straightforwardly as I can, that we would administratively make whatever determination is necessary with respect to the handling of tips in such a way that it would not contribute to the kind of practices to which you refer, and would be designed to curtail those practices as far as possible.

Mr. ROOSEVELT. Thank you, sir. Now, in the same area, uniforms and room and board allowances - does the same administrative setup take care of those ? Secretary Wirtz. Yes, sir; it does.

Mr. ROOSEVELT. Lastly, on this point, in the question of resorts, or seasonal hotels, how do you view this situation? Should we give special attention there?

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