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I am glad you have acknowledged the first big mistake I have found from the Oregon Senator in my over 10 years of working with him. He has boasted constantly of the mild weather here. Every time a blizzard hit us in Texas and closed the airfield and I couldn't get home, he said, "You ought to come to my State; we never have blizzards; we don't have frozen winters.” And now we come up and see just about as rough a winter as we have in Texas.
We didn't ask for this. We didn't want to come to this kind of weather, Senator Morse, but it is unusual after you have assured us for so long that your weather was superior to my State.
I want to express my appreciation along with Senator Morse to the staff, the people who have come away from their homes all on short notice, because we have to work this into our schedule so they don't have any say.
We have two very able counsel here from the majority party, and since neither Senator Javits or Senator Prouty could be here, two very able counsel from the minority party are here.
We do this on all reports we file from the Senate after hearings are completed. We vote on the bill. Regardless of how the vote is divided, the report that goes to the Senate floor must be approved by the counsel and the parties. Both sides must have an accurate report of what we do, whether they agree or not, and anybody who doesn't agree with that minority view. So each report is not a sudden trying to slip something by somebody in the Senate of the United States. That is reported to happen in some legislative bodies of America. I won't say it does. I live in the State capital, and I have heard that at times, but we don't operate that way in the Senate of the United States.
Senator Morse, if I took time to make a thumbnail summary of what you have done for the cause of education as chairman of the Education Subcommittee we wouldn't get along with this hearing, the secondary education bill, higher education bill, Higher Education Facilities Act, one after another, which has upgraded American education beyond the level of any educational system anywhere else in the world. But, gentlemen, I know you are here in the inclement weather and you want to finish to get back to your businesses and other work, so we will start now with actual testimony.
The first witness is Mr. Arthur E. Farr, of the Northwest Marine Iron Works, Portland, Oreg., representing the Western Shipbuilding Association.
Is Mr. Farr here?
Will you come around, Mr. Farr, and if you have any staff members accompanying you that you would like to have at the table, ask them. to come up with you, or any secretaries of any kind who might have any data you want to refer to, any counsel or any type of staff at your side, bring them with you. STATEMENT OF ARTHUR E. FARR, NORTHWEST MARINE IRON
WORKS, PORTLAND, OREG.; REPRESENTING WESTERN SHIP-
Mr. Chairman, Senator Morse, and other distinguished members of your committee, I am indeed honored to present the position of the Pacific coast shipyards as it relates to S. 2485.
I have prepared a statement which I would like to read for the record and I will answer any questions the committee may have afterwards. I will make my presentation as short as possible so that others may have your valuable time to present their case.
I am Arthur E. Farr of Portland, Oreg., chairman of the board of Western Shipbuilding Association, and an operator of a shipyard in Portland, Oreg. W.S.A. is an association which represents the interests of the ship repair and shipbuilding industry, and allied industries of the west coast in Washington, Oregon, and California. Most of the firms constituting the industry have been in business for many years, employing workmen covered by the Federal Longshoremen's and Harbor Workers' Compensation Act.
The American Merchant Marine and the shipyard industry have been criticized in recent months by certain individuals in the present administration for their inability to meet foreign competition in the construction, repair, maintenance, and operation of oceangoing vessels. The administration has also, we understand, been in the process of attempting to formulate a new maritime policy for the United States, but the new policy has not yet been forthcoming. In addition, there are several bílls now pending in the Congress (other than those concerning the Longshoremen's and Harbor Workers' Compensation Act) which vitually affect the status and future of the various maritime industries. These factors have prompted the ship repair and shipbuilding industry to seek every means possible to reduce costs and meet competition.
Passage of S. 2485 in its presently proposed form would obviously increase the costs to the shipyards in performing their work, and thus tend to offset, or even possibly defeat, their attempt to cut costs.
The aspects of S. 2485 relating to increased benefits to injured workmen are not within the scope of my comments at this time. However, I will take this opportunity to briefly state that while we agree that some changes in the benefit structure may be in order, we cannot agree that the benefit changes proposed in S. 2485 are in the best interests of the shipbuilding and ship repair industry as a whole. In this regard we are particularly concerned about (a) the proposed increase of some 50 percent in benefits and (b) the removal of the current $24,000 maximum benefit limit without even considering the great impact of the costs of the other sections of the bill. This would be a tremendous economic burden to place on the maritime industry. Careful consideration must be given to not only the earnings of longshoremen, but also to the earnings of the shipyard industry labor and other groups falling within the scope of the act to arrive at a fair and reasonable compensation rate. Possibly it should be emphasized at this time that the title "the Federal Longshoremen's and Harbor Workers' Compensation Act” is misleading since the broad scope coverage of the act embraces a majority of workmen who are not longshore
Also, the prevalence of third party liability must be considered before any proposed adjustments in compensation, that is, where an employee covered under the act has the legal right to additional compensation by virtue of legal proceedings against the employer under the maritime doctrine of seaworthiness.
The aspects of S. 2485 on which we appear here to oppose are those which would place on employers the burden of the costs of the Department of Labor in administering the Longshoremen's and Harbor Workers' Compensation Act which includes the so-called user charges for safety programs. The crux of our opposition is the added substantial costs which will fall on the industry as a result of this bill if this aspect is not deleted. Here we are discussing increased benefits for employees or workmen and at the same time concerning ourselves with semipolitical observations on budgetary requirements. They are not synonymous. The projected costs of $3.4 million annually is nebulous, the next year under the Secretary's discretion it could well be $13.4 million annually. The act was enacted by Congress to be administered by the Department of Labor for the benefit of the recipient workmen. Shall we assess also a portion of the so-called user charges to the employee as well as the employer?
Many of the members of this committee will undoubtedly recall the very serious situation of the private shipyards prior to Vietnam resulting from the shortage of available work. I am personally convinced that a substantial number of private yards would have succumbed due to lack of work had it not been for the enactment of Federal legislation which allocated to private yards at least 35 percent of the repair, conversion, and alteration work on U.S. naval vessels. With the increase in this type of work resulting from the Vietnam conflict, the private yards have not pressed for continuation of the 35/65 formula.
Nevertheless, even with the Vietnam-generated work the private yards are by no means saturated with work, and competition for the available contracts is still very intense. To increase the costs of the private yards to carry on business at this time is most certainly inadvisable. On repair, conversion, and alteration work, the private yards are eren now in competition with the naval yards, not on a jobby-job basis, but certainly on an overall cost comparison basis. And as the available work declines, overhead items, such as workmen's compensation administration, user, and other costs, become increasingly significant.
The subsidized portion of the U.S. merchant fleet has been severely criticized and these additional costs, with which they will be faced and eventually passed on to the taxpayer, should not be lost in the review of the subject bill. On the other hand, the wisubsidized portion of the American merchant marine, including the tramp operators, are in a very obvious and precarious position insofar as their operating costs are concerned, and this additional burden could very well increase the decline of vessels in this segment of the American merchant marine fleet.
We on the Pacific coast have in recent months convinced some of the foreign operators to do their drydocking and repairs in American yards because of dispatch time for their vessels. In order to compete with foreign shipyards for this business, we have had to work on a very close margin. Here we have a segment of worldwide shipping that is very desirous from the concept of a balanced incoming dollar revenue to build up our economic well-being at this crucial period. This market, unfortunately, because of a very marginal operating cost basis, would eventually be lost.
In view of the proven necessity of the private yards to our national defense, and the importance of maintaining the U.S. status as a major world seapower, we believe there is more than adequate justification for the Government continuing to bear the costs of administering the act.
As I said above, the current schedule of benefits payable to injured workmen may need some adjustments, and the cost of a moderate, reasonable increase in this area may have to be borne by the private industry, subject, however, to my above comments on the proposed increase in benefits and removal of the maximum, lump-sum benefit. But these added costs, when combined with the proposed addition of administration and user costs, are more than the industry should be expected to shoulder under the present circumstances.
Thank you for this opportunity to express to you our views on this very important matter.
Senator Y ARBOROUGH. Thank you, Mr. Farr. That is a very clear and concise statement.
You have stated your position and given us points to study on in that with a minimum of words. I congratulate you and your facility for saying a lot in a few words.
I have no questions at this time.
Senator MORSE. I have one comment rather than a question, Mr. Chairman, in regard to assignment of memorandum preparation for counsel, both majority and minority. In your statement, Mr. Farr, you say:
The aspects of S. 2485 on which we appear here to oppose are those which would place on employers the burden of the costs of the Department of Labor in administering the Longshoremen's and Harbor Workers' Compensation Act, which includes the so-called user charges for safety programs.
I would like to have both the majority counsel and minority counsel for the committee to cooperate in making an analysis of any analogous or somewhat comparable programs in the Federal Government on this question of what, if any, costs does the Federal Government pay in administering somewhat similar or analogous acts. I do not know of any. I am thinking off the top of my head when I make suggestions to counsel. I think you ought to go into an analysis of the administration of railroad benefit acts to see how the administrative costs are covered as far as the governmental participation and administration is concerned.
My recollection is that you will find, of course, that a substantial budget is provided by the Federal Government for the maintenance of some of these Federal agencies, but I couldn't testify as to how that budget is segmentized in regard to the payment of administrative costs in any area that might be somewhat similar to this, Mr. Farr, and I think we ought to have a memorandum on that.
Take, for example, the administration benefits under jurisdiction of the Railway Retirement Board and the Railway Adjustment Board. Then I think you ought to go into the payment of administrative costs for certain services rendered by the Department of Agriculture. See to what extent the Federal Government assumes administrative costs which, under this bill, it would not assume if the section that Mr. Farr refers to were enacted. What I am suggesting is to go on a searching expedition, Mr. Chairman. I think we ought to have it for the benefit of the parties to the case.
Also, Mr. Farr, if you or others in industry, and also the labor witnesses have any information in your files that would help us make such a comparison, you ought to make it available in a supplemental memorandum.
Likewise, I think we ought to have from the industry a memorandum that gives us some notion as to what you think the costs would be if it is transferred from the Department of Labor to industry. Give us a breakdown of potential costs you think would confront you in case the bill goes through in its present form. I am sure before the industry completes its records it will have that information, and I just want to stress it at this time.
Mr. FARR. Thank you, gentlemen. We do have that information available and will make it available to you in memorandum form.
I think you very much for the opportunity of being able to testify. Senator YARBOROUGH. Thank you, Mr. Farr.
As chairman of this subcommittee, I assure you this has been borne out of the U.S. Treasury, this cost, as a general item of expense for administration of the Labor Department. This is a Bureau of Budget request, that this cost be shifted over from the Government to the private sector of our economy. I assure you I will give that careful consideration with all the data we assemble. Thank you very much.
Senator YARBOROUGH. Are there any questions from minority counsel ?
Mr. MITTELMAN. No. Senator YARBOROUGH. Thank you. The next witness is Mr. Ralph Dewey of San Francisco. Mr. Dewey, will you come around, and if you have any assistants with you that you care to bring, counsel or anyone who has data that you desire to call on who have records or anything, you may bring them with you.
STATEMENT OF RALPH B. DEWEY ON BEHALF OF PACIFIC AMERI.
CAN STEAMSHIP ASSOCIATION AND PACIFIC MARITIME ASSOCIATION; ACCOMPANIED BY J. STEWART HARRISON, ATTORNEY, SAN FRANCISCO, CALIF.
, Mr. DEWEY. Thank you very much, Mr. Chairman.
I am going to be accompanied in this testimony by the counsel to our organization, Mr. J. Stewart Harrison, of the firm of Brobeck, Phleger & Harrison, of San Francisco. Mr. Harrison has been counsel to this organization for many years in particular reference to some of the thorny questions we are going to discuss this morning, and has participated in Government inquiries of various kinds along the very lines this committee is inquiring into this morning.
Before I commence, Mr. Chairman, I wish also as a westerner to welcome a Texan of great stature in the Senate to the west coast and to say that I had hoped that your time would afford a visit to California, but I understand you must return to Washington.
Senator YARBOROUGH. Yes. It is very difficult to schedule these hearings, as you know, Mr. Dewey, and they were called because of the Pacific coast operators saying that their situation was different,