employees now subject. The amendments also added an additional 100,000 establishments to the 1 million previously covered. For the 24 million previously covered employees the minimum wage was increased from $1 to $1.25 per hour to be effective September 3, 1963, with an in- : terim increase to $1.15 per hour on September 3, 1961. It is estimated that 1,900,000 of these were receiving less than $1.15 an hour and 3 million were receiving less than $1.25 per hour. For the 3,600,000 employees newly covered by the wage-hour law, the statute provides that these workers will be entitled to $1.25 as of September 3, 1965, this rate to be attained in stages as follows: $1 per hour as of September 3, 1961, $1.15 per hour on September 3, 1964, and $1.25 on September 3, 1965. As of last summer 700,000 of these 3,600,000 workers were earning less than $1; 1,100,000 less than $1.15; and 1,300,000 less than $1.25. In addition, newly covered workers will be entitled to the time and one-half for overtime provisions after 44 hours per week from September 3, 1963, after 42 hours from September 3, 1964, and after 40 hours from September 3, 1965. These varying minimum wage and overtime standards for previously covered and newly covered employees have the effect of requiring us to administer two sets of constantly changing standards for different groups of employees over a 4-year period. Significant and substantial changes were also made in many other provisions of the act. The 1961 amendments provided a new basis of coverage, the enterprise, and made some 15 major changes in the coverage and exemption provisions of the act. These changes have thrown a tremendous enforcement burden on the Division. A considerable part of the wage increases of hundreds of millions of dollars required for millions of employees will not be given to them automatically. This noncompliance must be discovered by investigation and corrected. Since September, the number of complaints, alleging violations of the law, has increased to a level even higher than previously estimated. Complaints are being filed at an annual rate in excess of 17,000, which is the highest in the history of the Wage and Hour Division, except for perhaps the period immediately after the enactment of the Fair Labor Standards Act in 1938. We must investigate these complaints promptly if the law is to be properly enforced. In fiscal year 1961 investigation findings reached new highs. Minimum wage and overtime underpayments increased to almost $31 million from the $28 million found due in 1960. Also, the number of employees underpaid, the amount paid to employees and the number of minors found illegally employed increased over 1960. During the first 6 months of fiscal year 1962, underpayments disclosed by investigations have remained high, in spite of substantial, but necessary, diversions of time devoted to training new investigators, retraining experienced investigators, and servicing hundreds of thousands of letters, telephone calls, and personal inquiries from employers and employees and their representatives. This appropriation request provides for an enforcement staff at the same level as is authorized for the current fiscal year. This staff when fully trained should enable us to meet our new responsibilities. On September 3, 1963, when statutory changes in the minimum wage and overtime standards take place, the Division will be faced with the additional impact of these changes. Although the Division normally maintains a year-round educational program, and the 1961 amendments necessitated a broad-scaled informational program, there will be a continued need to alert nearly 28 million employees and approximately 1,100,000 establishments of the changes in the act as each change becomes effective. PUBLIC CONTRACTS WAGE DETERMINATION PROGRAM The volume of Government procurement subject to the Public Contracts Act has been increasing. For example, the value of contract awards reported to the Division by the various procurement agencies rose more than 40 percent between fiscal year 1960 and fiscal year 1961. Concomitant with this development, there has been an increasing number of inquiries relating to questions of applicability of prevailing minimum wage determinations, determinations of regular practice, exemptions, basic coverage of the act, and eligibility of individual bidders. Recently there has been considerably greater public interest and participation in the wage determination program which has added appreciably to the complexity of the proceedings. TERRITORIAL WAGE ORDER PROGRAM All industries in Puerto Rico that have not reached the statutory minimum wage rates will be reviewed in 1963. The 29 industries to be reviewed by industry committees compares to 17 which would have been scheduled this year had there been no amendments to the act. Preparation of economic reports for the industry committees will, in many eses, require more work than in the immediate past because of the additional Ember of industry committees and the more complex nature of the reports. REGULATIONS AND EXEMPTIONS The 1961 amendments have rendered obsolete a substantial portion of all prerously published interpretative materials on the Fair Labor Standards Act. Ertensive revisions of existing documents have become mandatory. A large volume of new material will have to be prepared most of which will require considerable research as well as close examination of the impact of the amended law on industrial and trade practices. There continues a heavy flow of inquiries, which require the formulation of interpretative positions. As our enforcement program advances and more employers and employees become aware of the many problem areas, our already heavy workload will be multiplied. In line with our policy to keep all interested parties informed, and to formulate our interpretative positions on the basis of the best possible evidence, including a thorough study of the legislative history, we have consulted with and will continue to consult with industry groups, labor representatives and others. This practice which includes public hearings procedures has also been followed in the development or revision of regulations applicable to the administration of the act, and will be continued extensively in fiscal year 1963. SPECIAL MINIMUM WAGES In general, the volume of activity on special minimum wages in fiscal 1963 will approximate that for fiscal 1962. However, in addition, there will be required the continued development and implementation of the special regulations for employment at less than the minimum wage as authorized under section 14 of the amended act. Many important new problems will continue to require constant evaluation and possible modification in the light of operating experience. There will also be a need for preparations to be made for the appropriate changes necessitated by those statutory changes effective on September 3, 1963. ECONOMIC STUDIES The need for a program of studies on the effects of changes in minimum wage legislation was recognized by the Congress when the present section 4(d) of the act was adopted in 1955. At that time congressional committees recognized that the amount of information available on the effects of the act's provisions, especially the minimum wage, was insufficient to provide an adequate basis for congressional consideration of proposals to change the minimum wage. In accordance with the requirements of section 4(d) of the Fair Labor Standards Act, we must carry on a continuing program of studies of the economic effects of the 1961 amendments to the act. Essentially, these studies involve obtaining information on wages, hours, and employment, for a base period prior to the effective date of the amendments, and obtaining corresponding information at several predetermined intervals after the effective date." Such surveys provide information on the economic changes which took place and through analysis of these and other pertinent data we can determine at least in part to what extent the changes are related to the act's requirements. The surveys to obtain information for the preamendment period have already been made. The followup surveys of these areas and industries are scheduled to be conducted in early fiscal 1963. Upon completion, these studies will execute the mandatory requirement of section 4(d) and will provide the necessary data to the executive and legislative branches of the Government. One of the most fundamental problems facing an agency with statutory enforcement responsibility is to determine the level of compliance. Data on the extent of noncompliance, types of establishments involved and the nature of violations in such establishments is vital for the intelligent planning of an effective and efficient enforcement program. In 1957 the Divisions conducted a compliance survey to obtain such information. Although much valuable data was secured which served to improve our enforcement program, it was also revealed that additional facts were needed particularly regarding the status of compliance in local areas and segments of industry. Next year we plan to conduct a compliance survey in order to: (1) Provide current compliance data since 6 years have elapsed since the last survey; (2) Secure compliance data in the light of the amendments which involve new coverage, changes in the minimum wage requirements and changes in many of the other provisions; (3) Obtain compliance data in those areas and industry segments not handled in the previous survey. The economic effects of wage determinations under the Public Contracts Act have been the subject of considerable interest. In order to evaluate this program properly, we will conduct studies of the economic effects of wage determinations under the Public Contracts Act. The results will help resolve conflicting allegations regarding the economic effects of the Walsh-Healey wage determination program. Section 4(e) of the act requires that surveys be made of the effects on unemployment and employment of foreign competition. Currently we are making an initial study in the jewelry and silverware industry. With the tremendous interest in the problem of foreign competition, this area must be expanded next year. GENERAL COMMENT In summary, the 1961 amendments to the Fair Labor Standards Act presented the divisions with a multitude of challenges. We have a substantially larger enforcement workload, a more complex statute to interpret and administer, stepped-up activity in the public contracts wage determinations and Puerto Rican wage order programs, and the mandate to make number of important economic studies. The current year 1962 represents a year of transition. have been tooling up during the last few months-expanding our staff, training and retraining, informing employers and employees of the provisions of the amendments, answering a tremendous volume of inquiries, and developing necessary interpretative materials. We This budget will enable us to have an organization in being to do a vigorous job in administration and enforcement of the acts. We have instituted a number of improvements and efficiency measures in our operations, which will permit us to accomplish the additional workload within the funds requested. We will have the basic organization for handling the additional problems and workload resulting from the statutory changes which will become effective in September 1963. AMENDMENTS TO FAIR LABOR STANDARDS ACT Mr. LUNDQUIST. Our appropriation request will enable us to continue our program at the same level as in the previous year. The 1961 amendments to the Fair Labor Standards Act, effective September 3, 1961, will continue to have a tremendous impact on the size and nature of our workload during fiscal 1963. These amendments were the most substantial and sweeping changes in the law since its enactment in 1938. For the first time since 1938, coverage of the act was expanded. The 1961 amendments extended the act benefits to 3,600,000 additional workers making a total of 27,600,000 employees now subject. The amendments also added an additional 100,000 establishments to the 1 million previously covered. The task of interpreting, explaining, and applying the changed provisions have confronted us with a challenge almost as great as the administrative problems that had to be met when the act first became effective in 1938. The preparation and amendment of interpretive bulletins, regulations, and the execution of an educational and informational program continues to require our closest attention. Enforcement activity has had to be accelerated. Complaints are being received at an annual rate as high as any time in history of the act. While we think this budget is quite conservative, we do believe that these funds will enable us to provide a vigorous, effective enforcement and administration of the Fair Labor Standards Act and the Walsh-Healey Public Contracts Act. AMOUNT REQUESTED Senator HILL. You are asking now for how much for the present year? Mr. LUNDQUIST. $458,000. The amount represents an increase to provide for the regulated promotion of investigators and for defense mobilization activities financed in 1962 from other accounts and for adjustment of certain travel obligations resulting from changes in travel allowances. Senator HILL. Most of this increase is due to the recent amendment to the act? Mr. LUNDQUIST. No, the increase occurred the last year, Mr. Chairman, in our budget. The budget really remains the same as last year. Senator HILL. It is practically the same as last year? Mr. LUNDQUIST. Yes, sir. Senator HILL. With reference to the new amendment to the act, do you find many problems growing out of those amendments? Mr. LUNDQUIST. We find some problems, Mr. Chairman, yes. think we are solving those problems, and we believe we have most of them solved; but, of course, from day to day and from time to time other matters do arise and we meet them as they arise. We look for no major problems in this area. We think the new minimum is being absorbed very splendidly, and the economy, we think, has benefited as a result of this enactment last year. Senator HILL. So, you really do not have too many problems as far as new minimums are concerned? Mr. LUNDQUIST. No, we have not. Of course, we must continue our investigative program. We have broadened the coverage, as you know, about 3,600,000 workers, substantially in the retail area. This is a new field. It does require our careful and considered attention. BUDGET ALLOWANCE Senator HILL. I believe the budget allowed you $100,000 less than you requested; is that right? Mr. LUNDQUIST. Requested of the Bureau of the Budget? Mr. LUNDQUIST. We requested of the Bureau of the Budget, $20,763,000. The budget estimate out of the Bureau of the Budget, was approximately $3 million less than that figure. We would have provided for approximately 200 additional investigators in the field. The Bureau of the Budget considered this, and looking over the whole program from their standpoint, decided that we should not have that many investigators. Senator HILL. They thought you could get along with what you now have; is that right? Mr. LUNDQUIST. That is right. Senator HILL. You have no additional investigators provided for in this budget? Mr. LUNDQUIST. No, sir, not in this budget. A total of 950 investigators were provided for last year and 950 provided for this year. Senator HILL. The same force for the next fiscal year as for the current fiscal year; is that right? Mr. LUNDQUIST. That is right. WORK OF DIVISION Senator HILL. Do you feel that your work is going forward satisfactorily? Mr. LUNDQUIST. We do. We have been in what we call a transitional period. We have been training new investigators. We have been engaging in a broad informational program. We have been tooling up along with the Solicitor in many areas involving interpretations, regulations, and popular style pamphlets and bulletins and other materials that we think are providing the necessary information in order to attain voluntary compliance. This is our major goal. Senator HILL. And you do get a great amount of voluntary compliance, do you not? Mr. LUNDQUIST. Yes; we do. The average American employer wants to comply with the Fair Labor Standards Act. Senator HILL. And you get that compliance? Mr. LUNDQUIST. Yes; we do. Senator HILL. That is a tribute to the American employer, is it not? Mr. LUNDQUIST. Yes; and we think it is a tribute to the Congress and the executive branch in its desire to provide funds to have a fair and vigorous enforcement program which we find necessary in those areas where problems do arise and some violations occur. As I indicated, we have a substantial increase in the number of complaints received. We anticipated this, but we are meeting those problems, and I think we can say satisfactorily. Senator HILL. We appreciate your testimony and we want to thank you and the members of your staff. |