Mr. O'BRIEN. No, sir, I can't do that. I might be able to get the figures. Senator KERR. You operate three hotels? Mr. O'BRIEN. Yes, sir. Senator KERR. Could you give us an estimate as to what part of your salary expense which would be subject to this tax, is with reference to employees who are now unquestionably covered by social security, and who are paid in regular amounts, and in whose compensation tips do not enter as a factor? Mr. O'BRIEN. I would hate to hazard a guess. I will be glad to get you the figures and submit them to you. Senator KERR. It is amazing. I never did operate a hotel, but I think I could make guess. Senator TAFT. Well, you see, you have certain difficulties. You cannot just take your pay roll of tipped people as against untipped people, because you have to reduce them all to $3,000 apiece, on which they pay. The $4,000,000 is not figured on all your salaries of untipped employees. It is only figured on salaries up to $3,000. Mr. O'BRIEN. That is right. Senator TAFT. But can you tell us what proportion of total pay roll is paid to tipped employees as against untipped employees? Have you any idea as to that? Mr. O'BRIEN. Senator, I don't have the figures in my head. I can get them very quickly. I just hate to give a figure out of my head which may be inaccurate. Senator MILLIKIN. It would be obviously difficult, because some hotels make a big play for the restaurant business and others do not. But the general overhead of the bookkeepers, the cashiers, the people behind the desk, and the people down in the basement that operate the machinery goes on regardless of how big their restaurant business may be. Mr. O'BRIEN. That is correct, sir. Senator MILLIKIN. I am rather an expert on hotels because I lived in one for 21 years. Senator KERR. Would you not say that on an average less than 16 percent of the employees come within the classification of tipped employees? Mr. O'BRIEN. Oh, no, sir. Senator KERR. Well, aside from the waiters in the restaurant and the bellboys? Mr. O'BRIEN. And the waitresses. Senator KERR. And the waitresses. Mr. O'BRIEN. Of course, it depends upon the relationship of your restaurant business to your room business. But I have more than that. I would have, say, 30 percent. Senator KERR. Thirty percent. Would you say that that was less than the general average? You refer here to the fact that the hotel business is the seventh largest business in the country. Would you say that 30 percent would be more or less than the general average in that business? Mr. O'BRIEN. I would imagine it would be about the average. But there are some hotels that have very small restaurant facilities, and other hotels that have unusually large restaurant facilities. Senator KERR. Most of the volume of rooms is in hotels where the restaurant service is a comparatively small part of the over-all business, is it not? Mr. O'BRIEN. It is hard to give a general answer to that, Senator, because the situation varies so much between hotels. Senator KERR. Well, then, with reference to this $4,000,000, in your situation 70 percent of it would be unaffected by the recommendations you make here. Mr. O'BRIEN. That is right. Senator KERR. In other words, with reference to 70 percent of it, that is going to be present whether the recommendations you have made are accepted or not? Mr. O'BRIEN. That is correct. Senator KERR. That is what I was trying to bring out. Senator MILLIKIN. Would this be true: That where a hotel is not in a position to push its liquor business, the restaurants are usually a losing proposition? Mr. O'BRIEN. That is very true. Senator MILLIKIN. And where you find a profitable restaurant, not in all cases, of course, it is usually because of its relationship to the liquor business; is that not true? Mr. O'BRIEN. Yes. Although unfortunately we are finding a very serious slump in the liquor business. Senator MILLIKIN. Would you like us to take the cabaret tax off? Mr. O'BRIEN. I would, very much. As a matter of fact, I am going to close one room in the next 2 weeks as a result of increasing guest resistance to that tax. The CHAIRMAN. Thank you very much. Senator TAFT. May I ask one question? The CHAIRMAN. Senator Taft. Senator TAFT. Are there any considerable number of hotels that have pension plans for retirement? That is rather rare in the hotel business, is it not? Mr. O'BRIEN. We have them in our organization. Senator TAFT. You do? Mr. O'BRIEN. Yes. It is spreading. The Albert Pick Hotels have, I know. I think the Hilton Hotels have. It is a program that has come about in the last few years and it is growing. Senator TAFT. The ordinary hotel today, though, does not have a pension plan, does it? Mr. O'BRIEN. You are right, Senator. The CHAIRMAN. Thank you very much, Mr. O'Brien. Mr. O'BRIEN. Thank you, Mr. Chairman. The CHAIRMAN. Congressman Van Zandt, did you wish to make a statement? STATEMENT OF HON. JAMES E. VAN ZANDT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA Representative VAN ZANDT. Thank you, Mr. Chairman. I have come here to ask that I be permitted to insert a statement in the record. I must return to a meeting of the House Armed Services Committee, and I will, with your permission, file this statement. It is in support of H. R. 6000 and follows the lines of my thought that was contained in the statement I made before the House of Representatives when H. R. 6000 was before the body and approved. The CHAIRMAN. You may file it, Congressman. Thank you very much, sir. (The statement of Representative Van Zandt follows:) STATEMENT OF JAMES E. VAN ZANDT, MEMBER OF CONGRESS, TWENTY-SECOND DISTRICT OF PENNSYLVANIA, WITH RESPECT TO AMENDING THE SOCIAL SECURITY Аст Mr. Chairman, I supported H. R. 6000 when it passed the House of Representatives during the first session of the Eighty-first Congress. I did so, because I felt it was a step in the right direction. Yet at the same time it was my belief that the provisions of H. R. 6000 did not truly meet the general problem of old-age pensions. As many of you know, I have long been associated with various groups in the old-age pension field including the Townsend organization and the American pension plan. I am sure that you will agree with me that these pension groups are entitled to a lot of credit for they are pioneers in the effort to bring to the attention of the American people the general problem of old-age pensions. Fifteen years ago the American people were faced with the problem of old-age pensions and from that day until this there has been a constant effort by pension groups and many of us in Congress to bring about a general revision of social security in all of its aspects. You know as well as I do that when Congress approved the Social Security Act our Government accepted the responsibility of that segment of the population covered by the act. This was the beginning of a program that was designed to provide eventually for the problems of our aged. Since the Social Security Act became effective statistical information furnished by Government agencies reveals that the number of aged persons is increasing rapidly due to the lengthening of the span of life because of the rapid strides made by the medical profession in treating human ills. Then, too, we must recognize that the Social Security Act has resulted in many people depending upon the Government for security in their old age. While this attitude may be subject to criticism, yet it actually exists and the condition must be faced. We cannot escape the fact that the cost of living has aggravated the general problem of old-age pensions and that present benefits under the Social Security Act are wholly inadequate. Then, of course, we have the cost of social security which has developed to be quite a problem to the Federal and State Governments, as well as to the employer and employees. While I was not in Congress when the Social Security Act was approved, yet I felt at that time that since our Government was committed to provide benefits to the aged the program was not broad enough since it did not cover all citizens. Many of you will remember that at that time I was identified with the Veterans of Foreign Wars as commander in chief and my activities brought me in contact with not only those covered under the law but also with a large number not covered. To be frank, the glaring defects in the Social Security Act were immediately apparent. Today we are faced with the terrific problem of old-age pensions. It is my opinion that the Congress of the United States through its failure to take positive action in this field over a period of 15 years, is responsible for the situation we are confronted with today. If Congress had kept abreast of developments in the field of old-age pensions and had taken action instead of using delaying tactics, the issue would have been met and we would have today the necessary laws to meet present-day needs. Without doubt the question of industrial pensions and the many pension plans in effect at the present time have made this general problem of old-age pensions an acute one. As I have already said, it is my opinion that if Congress had taken action, the pension problem would have been solved years ago and we would not have the conglomeration of pension plans now being offered to the American people. It is the consensus of opinion that the Social Security Act will have to be rewritten or a substitute adopted. It is freely predicted that the cost of social security benefits in the near future will be so great to employer and employee that a Federal Government subsidy will be necessary. Then, let us not forget, that we are talking only about earned benefits under the Social Security Act and that we have not considered the cost of old age or public assistance to persons who are not contributors to the social-security fund. The cost of these old-age pensions, as you know, is shared by the Federal and State Governments. In mentioning the total cost of the Social Security Act, it is evident that the day is not far off when the cost of taking care of our aged under all phases of the Social Security Act will become an unbearable burden to Federal and State Governments as well as to employer and employee. In closing, I recognize that your committee has access to Government statistics that concern all phases of the general problem of old-age pensions. For that reason, I have confined my remarks to a general discussion of the subject. It is my considered judgment, however, that the only answer to the old-age-pension problem is a universal pension for the aged of this Nation. It may be the Townsend or American pension plan or some similar pension proposal that will provide the answer to this problem. One thing certain, we are not on the right track at present. It is a known fact that the aged of this country are not being taken care of for many of them are hungry. Therefore, I say to you, Congress had better devise a universal pension plan in keeping with the solvency of our Government and the needs of the American people. The CHAIRMAN. Mr. Sands? You were called first, Mr. Sands. Will you give your full name and the capacity in which you appear for the benefit of the record? STATEMENT OF CHARLES E. SANDS, REPRESENTING HOTEL AND RESTAURANT EMPLOYEES AND BARTENDERS INTERNATIONAL UNION, CINCINNATI, OHIO Mr. SANDS. Mr. Chairman and members of the committee, I represent the Hotel and Restaurant Employees and Bartenders International Union of America. We have approximately 450,000 members, made up from 800 local unions throughout the United States, Canada, Puerto Rico, Hawaii, and Alaska. We are affiliated with the American Federation of Labor and with the Railway Labor Executives Association, and we subscribe wholeheartedly to the presentation as made by the American Federation of Labor. I will not burden the committee by reiterating anything that may have been said, except that I do want particularly to appear here this morning in support of and to explain, as much as I can, and answer questions that I am able to, respecting the section of the bill, H. R. 6000, which deals with the tipping question or gratuities. Our international union is wholeheartedly opposed to the tipping question. I was very pleased to hear the representative of the hotel men say that they didn't like it. Because for 50 years we have been trying to get together with them to eliminate the tipping question. Senator KERR. Let me see if I understood your statement. Did you say you were opposed to the tipping question? Mr. SANDS. We are opposed to tips; yes. We believe that employees, our members, should be paid an adequate wage and commission so that they would not be forced to take tips. And to that end, our international union is on record, and we have been trying for 50 years to work out some system that would bring it about, but we have never had, in that instance, the cooperation of the hotel men. Senator KERR. Well, were you under the impression that they had been forced to take tips? Mr. SANDS. Forced to take tips? Yes, they are forced. In order to make a livelihood, they are forced to take the tips. They are hired in these jobs, and it is an understood fact that tips are theirs, and that they are a part of the money they take home. And the employees who take these tips, in convention 4 years ago in Milwaukee, and again in Chicago last April, went on record in favor of this proposition, that tips should be included under the social-security system. That is the position of our international union. Senator KERR. Now, if the employees want to eliminate the sys tem Mr. SANDS. The employees will eliminate the system. If the employees want to eliminate the system and the employers want to eliminate the system, all we will have to do is to get the public to agree to it, and it will be unanimous, will it not? Mr. SANDS. That would be a good idea. I was interested when social security came into existence, 15 years ago, and I was led to believe, at least, that it was for the purpose of protecting workers when they became aged, permitting them to retire, or providing some payment to their heirs at death. Now we are confronted here, with this situation: that for 15 years the tips that these workers have made, and recognized by the employer, have never resulted in any premium for social-security purposes. The employers have not paid on it, and neither have the employees, with the result that the very purposes of the law is circumvented; because in the case of some of these employees, upon their retirement at 65 or upon their death the build-up of the money to their credit in social security is so meager that it is hardly worth going after. Because the substantial portion of their earnings over the past 15 years has been in the form of gratuities. Senator HOEY. What proportion of the compensation of these employees is represented by tips, and what proportion by salary? Mr. SANDS. That would vary, Senator, in the different classes of houses. Of course, in a high-class hotel or restaurant, naturally, the waiter or the waitress will make more than in other places, that are popular, or where the prices are cheaper. Senator HOEY. What sort of an income do they get? Mr. SANDS. Well, I will tell you, Senator. I worked out something, about 14 years ago, when we had numerous cases before the workmen's compensation board. Every time a waiter or waitress was injured we would have to go down and fight the cases. And we finally worked out, for Washington at least, where the compensation for an injured employee is two-thirds or was at that time twothirds, of his earning power. We worked out the scale, then, for waiters at $2 a day, and we worked it out at $3 in tips and a dollar in lieu of the meals that they do not get when they are out injured; and that is $6 a day, which is $36 a week. And the people, then, all of them—that is, the males-were entitled to $24 when injured on work. Senator HOEY. That was 14 years ago. But about what would it be now? Mr. SANDS. You can't define the tipping question. Of course, the employer comes in here and tells you what a big job it would be to obtain what the people make in tips. Well, he already has that in |