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mize expense in carryng out the act. Discussions have already been held with the Department of the Treasury for the purpose of exploring use on a reimbursable basis of existing personnel in that Department with knowledge and experience in the processing of loan applications. Such a procedure, which appears feasible, would, of course, minimize the cost of the program by avoiding the need for setting up in the Department of Commerce a group whose skills appear to parallel that already provided by the Department of the Treasury.
The Areas Assistance Act of 1956, in our opinion, would provide a program aptly fashioned to assist communities of our Nation which are areas of substantial and persistent unemployment and to enable the Federal Government to take preventive measures to minimize the increase in number of such areas. Its provisions have been carefully planned to make use of the excellent working relationship and contacts which Commerce has with State and local officials whose cooperation and concern in the solution of these problems are essential. We urge enactment of this proposal by the Congress, believing that it will provide the executive branch with authority to provide prompt and effective assistance at a minimum cost to the Federal taxpayer. The CHAIRMAN. Mr. Secretary, where are the depressed areas? How much territory do they cover?
Mr. MUELLER. Well, as indicated, sir, the main areas have been in the coal regions and the textiles areas. As far as the geographical area of the United States is concerned, they are somewhat widespread in the eastern half. I can read some of them to you, sir, if you would like.
For instance the major areas are Indiana, South Bend and Terre Haute;
In Massachusetts, Lawrence and Lowell;
In Minnesota, Duluth and Superior.
The CHAIRMAN. You mean that is the area affected?
Mr. MUELLER. Yes, sir, these are the major areas of substantial and persistent unemployment.
Mr. MUMMA. How about naming the commodities involved. For South Bend, that would be automobiles, wouldn't it?
Mr. MUELLER. Yes, sir.
The CHAIRMAN. Then New England, textiles?
Mr. MUELLER. That is right.
The CHAIRMAN. You don't mean that merely those cities are affected, but the regions surrounding them?
Mr. MUELLER. Yes, sir, the economic area.
The CHAIRMAN. How large are those economic areas?
Mr. MUELLER. They vary.
The CHAIRMAN. Well, take Kentucky.
Mr. MUELLER. The whole eastern part of Kentucky is depressed. The CHAIRMAN. The whole eastern part of the State.
Mr. MUELLER. Yes, sir.
Southern Illinois is another area, where coal mining is depressed. The CHAIRMAN. In other words, wherever there are coal mining and textile industries, there is depression, is that true?
Mr. MUELLER. Iwouldn't say depression, sir. I so would say that wherever there are coal mining areas and textile industry in the
North, there is liable to be a greater amount of unemployment than there is in the other industrial areas of the country.
The CHAIRMAN. That lack of employment not only affects that particular area but affects the whole State?
Mr. MUELLER. That is correct, sir.
The CHAIRMAN. How can you say, as is declared in the bill, that while the Nation as a whole is enjoying great prosperity there are large areas that are in deep depression? It seems to me the proper statement would be that while there is prosperity in many sections of the Nation, in other sections there is depression and unemploy
Mr. MUELLER. Well, we have at the present time, sir, 63.8 million people gainfully employed in the United States and only 2,700,000 unemployed. That is the greatest number by 212 million, of gainfully employed, over a year ago, and half a million or more less unemployed than there were at the same time.
Mr. HOLLAND. You say gainfully employed, do you mean full-time employed, or a man who makes 1 day of pay a week, is he employed under your ruling?
Mr. MUELLER. I wouldn't say 1 day, sir. The criteria which the States have in their unemployment compensation acts is that a man must make less than a certain amount per week, which generally amounts to 22 days' work. If he is employed less than half-time, he can apply for partial unemployment. I know he can in the State of Michigan.
Mr. HOLLAND. I think your figures are very misleading, because they are not true. You state there are so many people employed. That means they are employed. But they are not employed at living wages or living incomes.
Mr. MUELLER. I would like to be able, sir, to present to you the résumé of the Department of the Census which shows that the average employment in the country, I believe, is slightly under 40 hours per week on the average-39.7 or something like that. That is a matter of statistics that I would be glad to present to this committee, and give you the benefit of the monthly survey that shows exactly how many are employed on a full-time basis, and how many there are on a part-time basis, and the amount of part-time.
Mr. BOLTON. Just for clarification, Mr. Secretary, on a comparative basis these figures are compiled on the same standards as they have been in the past, is that correct?
Mr. MUELLER. For a number of years, sir, they have been compiled on this same basis-I think for more than 20 years.
Mr. MULTER. Will you yield, Mr. Holland?
Mr. HOLLAND. Yes, sir.
Mr. MULTER. I don't think you are quite accurate there. This administration, beginning in 1953, changed the manner of preparing our employment and unemployment statistics, isn't that correct?
Mr. MUELLER. There was an increase in the sampling procedure, which took a much broader look at the monthly figures. By "broader look", I mean a greater sampling. These statistics are gathered not by counting noses of every individual. You could see the impossibility of doing that on a monthly basis. But it is done on the basis of the most up-to-date statistical procedures, on a sampling basis.
About 2 years ago, in 1953, there was an increase in the sampling method, which is the basis on which the figures were developed.
Mr. MULTER. As a matter of fact, up to the end of 1952, the Labor Department compiled its statistics on the basis of sampling which did not rely solely on those who were drawing unemployment compensation but took into account not only those drawing unemployment compensation but those who were actually part-time unemployed, even though they didn't qualify for compensation, isn't that true?
Mr. MUELLER. That I believe is true. I would prefer, sir, to have that testimony presented by the Department of the Census.
Mr. WOLCOTT. It is here in the statistics of the Department of Labor, the economic indicators.
Mr. MULTER. As to how it is done now?
Mr. WOLCOTT. As to how it has been done.
Mr. MULTER. I think Mr. Holland had the witness. He yielded to
Mr. HOLLAND. I will yield to the chairman.
The CHAIRMAN. I believe I have the witness as the chairman.
The CHAIRMAN. I would like to ask a question.
Usually, when there is prosperity in this country, it covers the country like a blanket. Everybody is prosperous and no segment of the economy is deeply depressed. What is the fundamental reason for the unemployment in the textile and coal industries and other industries which are suffering?
Mr. MUELLER. You are asking me the $64,000 question, sir.
The CHAIRMAN. That is what I want answered.
Mr. MULTER. Does the record show the witness can't answer the question?
Mr. MUELLER. I can give you some of the reasons, sir.
Mr. WOLCOTT. I think probably he doesn't answer it because there might be an element of politics connected with it, which he wouldn't want to get into.
I will explain what I mean.
Mr. HOLLAND. That is not a sacrilege.
The CHAIRMAN. It is a fair question.
Mr. WOLCOTT. Yes, sir; it is a fair question and should have a fair
Mr. MULTER. From the witness?
Mr. WOLCOTT. It is perfectly all right with me.
I have only an
The CHAIRMAN. I think that is a fundamental question.
The CHAIRMAN. I think we ought to know that before we prescribe the remedy.
Mr. MUELLER. All right. I can cite, sir, the furniture business, which I was engaged in in Grand Rapids. At that time Grand Rapids was the principal producer of furniture. Today our good friends in High Point and in the North Carolina area produce probably five times as much furniture as we produce in the western Michigan area. You ask why? Why did the industry move down there? Because they could produce more economically, and capital and production seek the place where they can produce most efficiently.
The same thing is true of the textile industry. Why did they move out of the North? They moved because they could have their product made less expensively under better conditions, and they could market their product more efficiently and at lower cost. And that is the profit and loss system, that is the free enterprise system.
As a resident of Grand Rapids, I don't hold it against the people in the South that they have taken the industry, to a large extent, away from us. It is an economic condition. We can't fight that
The CHAIRMAN. Are you contemplating doing anything to relocate those industries? You wouldn't move them, would you? You wouldn't attempt to move the industry, if it had gone there because conditions are better for them?
Mr. MUELLER. No, I wouldn't attempt to move them; of course not. Everybody knows that the industrial development of the South has been a phenomenal success, and that it is going on all the time.
I don't want to give a political speech for our southern friends.
Mr. MUMMA. Here on page 12 you talk about robbing Peter to pay Paul. Don't you think that is what we have been doing with the TVA? We have been taxing the Northern States and put TVA there to give cheap power, and they advertise how cheap it is and that draws industry.
Mr. MUELLER. I do not believe the Federal Government should differentiate between any geographical or economic section of the United States to the advantage of one and the detriment of another. Mr. MULTER. Then you must be opposed to this bill.
Mr. MUELLER. I am not, sir. I do not say that we are going to take industries away from one locality and put them in another. Mr. MULTER. But you are going to help
Mr. MULTER. Wait a minute. This country is a dynamic country. It is a growing country. We say that there will be opportunities for industries to expand.
Now, we say that those industries which want to disperse themselves, and which want to have branch plants, we say that those are the types of industries that should be attracted to these areas. We do not want to rob one section of the country for the other, by virtue of giving them a Government subsidy or loan or any other advantage. The CHAIRMAN. You expect to rebuild these depressed areas with industries that have not been there before?
Mr. MUELLER. Right.
The CHAIRMAN. New industries?
Mr. MUELLER. Yes, sir.
The CHAIRMAN. You say that you are going to have some processing plants that will furnish these people with employment?
Mr. MUELLER. Yes, sir.
The CHAIRMAN. That will probably take the farmer off the farm, and there wouldn't be any agricultural production in that section; isn't that true?
Mr. MUELLER. No, I disagree with you, sir, because food processing sometimes is a seasonal process, and there have been many areas in this country where part-time processing plants have been established,
and a farmer is enabled to supplement his earnings on the farm by working part time in the plant.
The CHAIRMAN. That would be off-season employment, then?
Mr. MUELLER. Not altogether. I cited that as an example. There are some where he could work 4 or 5 hours a day on his plant and the rest of the day on his farm. There are many variations of that, sir. The CHAIRMAN. What interest have the local subdivisions shown in furnishing part of the money for this program?
Mr. MUELLER. Well, let's take Lowell, Mass.
The CHAIRMAN. For instance, the cities, in almost every instance, I believe, are limited in their tax rate, limited in their expenditures, limited in their indebtedness, and would probably be unable to raise the money if it were any considerable sum. Have you gone into that? Mr. MUELLER. Yes, sir; we have.
Let's take Wilkes-Barre, Pa., as an example. They have raised about $2 million. That money is raised from local citizens, not on a tax basis. It is raised as investment capital in the community.
The CHAIRMAN. Then you don't expect the cities, as corporate units, to furnish the money; you expect that to be furnished by private enterprise, and by individuals?
Mr. MUELLER. I would say by local developmental corporations, mainly, where capital is pooled by the local business people and local residents, who pool their capital to accomplish the objective of bringing in new industry.
The CHAIRMAN. The Government furnishes 25 percent, and that 25 percent has priority; has it not?
Mr. MUELLER. No, the priority could be given to the first mortgage holder on the property. In other words, in the example stated here, let's assume that the local developmental corporation or entity in Lowell, Mass., or the local chamber of commerce, has been discussing with a corporation in New York City, which is expanding and would like to establish a branch plant in a favorable climate and I mean economic climate-and they have been attracted to Lowell. They are a successful corporation and are going to establish a branch plant.
Now, the first thing that would be done would be to examine the prospects of their expected success in that area, and they would interest an insurance company or even local banks, if the banks have the lending power, to take a first mortgage on this new facility-let's say up to 60 percent.
The local people, however, using, for example, the local development corporation for that vicinity, must furnish 15 percent of the money to show their good faith. That is more or less equity money. That is after the first mortgage, and the Government comes in with a 25 percent loan.
The CHAIRMAN. How is the Government loan secured?
Mr. MUELLER. By a second mortgage on the property.
The CHAIRMAN. The local subdivision, the local corporate entity, furnishes 15 percent?
Mr. MUELLER. That is right.
The CHAIRMAN. And the provision would be that 60 percent is furnished by the local financial agencies?
Mr. MUELLER. Yes, sir, whether it is furnished as a first mortgage or furnished on a loan basis other than a mortgage loan is inconse