AMENDMENTS TO THE FAIR LABOR STANDARDS ACT

WEDNESDAY, MARCH 1, 1961

U.S. SENATE,

SUBCOMMITTEE ON LABOR OF THE

COMMITTEE ON LABOR AND PUBLIC WELFARE,

Washington, D.C.

The subcommittee met 9:30 a.m., pursuant to call, in room 4232, Senate Office Building, Senator Pat McNamara (chairman of the subcommittee) presiding.

Present: Senators McNamara (presiding), Randolph, Smith, Pell, Goldwater, and Dirksen.

Committee staff members present: Stewart E. McClure, chief clerk; John S. Forsythe, general counsel; Edward Friedman, counsel to subcommittee; John L. Sweeney, professional staff member of subcommittee; Michael J. Bernstein, minority counsel; Raymond D. Hurley and John D. Stringer, minority associate counsel, and Joseph Goldberg, technical adviser, U.S. Department of Labor.

Senator MCNAMARA. The hearing will be in order.

We are very happy to welcome Mr. Goldberg, the Secretary of Labor, this morning. He is our leadoff witness. Mr. Secretary, we have a record of your appearance in the House. If you have a prepared statement for the Senate, we shall be glad to make it a part of the record at this time. Do you have a statement?

STATEMENT OF HON. ARTHUR J. GOLDBERG, SECRETARY OF LABOR, ACCOMPANIED BY CHARLES DONAHUE, SOLICITOR OF LABOR, AND CLARENCE LUNDQUIST, ADMINISTRATOR OF THE WAGE AND HOUR DIVISION

Secretary GOLDBERG. Mr. Chairman, I do have a prepared statement for the Senate. With your permission, I would like to offer it for the record, and then very briefly summarize some of the points in this statement, not repeating what I said in the House, or what I have in this statement.

Senator MCNAMARA. Very well. We shall be glad to have you proceed in that manner.

(Secretary Goldberg's statement follows:)

STATEMENT OF ARTHUR J. GOLDBERG, SECRETARY OF LABOR

Mr. Chairman and members of the subcommittee, I am grateful for this opportunity to appear before you to discuss the administration's recommendations for amending the Fair Labor Standards Act. These recommendations are embodied in the draft bill transmitted to the Congress by President Kennedy

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on February 6 and introduced by Senator McNamara (as S. 895) for himself and Senators Morse, Randolph, Smith, and Pell.

One of my first tasks as Secretary of Labor was to assist the President in formulating the administration's proposals for amending the Fair Labor Standards Act. Hearings, reports, and debates compiled by the Congress over the past decade were reviewed. The various proposals that were agreed to by congressional committees as far back as 1949 and as recently as last year were examined.

Out of the counsel of experience, moderation, and prudence it was decided that we should strive for the attainable, without losing sight of the desirable; seek out the practical within the framework of the ideal.

This was not an easy task. But we found that the work done by this com mittee in 1959 and 1960 was tremendously helpful. After studying and analyzing this problem from all points of view, we reached the conclusion that the bill reported by this committee on June 27, 1960, came close to meeting the standards which we had set.

The bill which the administration proposes is very similar, with several exceptions which I shall discuss later, to the bill this committee agreed upon last year.

The need for improving the Federal wage and hour law was urgent in 1960it is obviously even more urgent in 1961.

With all due respect to the members of this committee, who I know have labored tirelessly to secure improvements in the act, these amendments are long overdue. It is now more than 23 years since President Roosevelt requested and Congress enacted the Fair Labor Standards Act "to extend the frontiers of social progress." The changing needs of American workers and the changing patterns of their employment require periodic reexamination of this law-a constant probing, a continuous seeking out of new "frontiers of social progress." For the past 5 years these frontiers have been explored but never brought within final legislative grasp. In 1957 hearings were held by this committee and by the House committee, but no conclusions were reached. In 1959 this committee held very extensive hearings and studied every aspect of increases in the minimum wage and the protection of the act. Last year, the House committee again held hearings. Both committees reported bills. (I believe this committee prepared six or seven tentative drafts before agreement was finally reached.) Both House and Senate worked their will on these bills. They were passed. But, as you gentlemen know, the conferees were not able to resolve differences and final enactment became impossible.

During the last Congress President, then Senator, Kennedy evidenced a vital interest in securing needed improvements in the act. A statement which he made on the floor of the Senate after all hope for wage-hour legislation had been abandoned last year bears repeating at this time. He said: "In my judgment this problem must be attacked again in January. If we cannot get a bill this year, we will get one next year. I can assure Senators that this matter will be brought to the floor again."

It is against this setting that S. 895 comes before you for consideration. It is we believe, a practical measure geared to the realities of the legislative process. It strikes a balance between some approaches which would extend the act to the outer limits of Federal constitutional authority and other approaches which would provide little or no additional protection.

Now I realize that there are large areas of employment beyond the present scope of the act which Congress might appropriately regulate within the act's broad purpose.

But the history of amendments to the act has indicated that improvements can be achieved only by proceeding step by step. For example, Congress proceeded cautiously in increasing the minimum wage in 1949 and again in 1955. It has proceeded even more cautiously in considering proposals to broaden the coverage of the act. Actually, when the minimum wage was increased to 75 cents an hour in 1949, the scope of the act's coverage was reduced. In 1955 the minimum was again increased, to its present level of $1 an hour, but no action was taken to extend protection to additional employees.

Here in S. 895 we are again approaching our goals step by step in an effort to secure some substantial yet modest improvements in the present law.

I heartily endorse the changes S. 895 would make in the act. This bill is patterned closely after the bill which this committee approved last year. There is, however, an important difference. S. 895 would extend the protection of the

act to the employees of certain enterprises engaged in commerce or in the production of goods for commerce. The bill approved by the committee last year would have based extended coverage on the engagement of enterprises in an activity affecting commerce. By continuing to apply the "commerce" and "production for commerce" bases of coverage, the administration's bill could draw upon the large body of administrative and judicial interpretations that have evolved during the nearly 23 years since the act become law. It does not use "affecting commerce" language which Congress considered but rejected in 1938, in 1949, and in subsequent years.

I would like now to discuss in some detail the specific provisions of the bill. First, as you know, it would increase to $1.25 an hour the minimum wage for workers who now have the protection of the $1 minimum. This would be done in progressive steps, commencing 4 months after the date of enactment, over a period of 2 years starting with $1.15 the first year, $1.20 the second year and $1.25 beginning with the third year.

Second, the bill would extend the protection of the act to an additional 4.3 million workers who are employed in large enterprises engaged in commerce or in the production of goods for commerce. These employees would be brought under a $1.25 minium wage over a period of 3 years commencing 4 months after the date of enactment. They would be entitled to a minimum wage of $1 during the first year, $1.05 the second year, $1.15 the third year, and $1.25 beginning with the fourth year. One year subsequent to the effective date, they would be given overtime protection.

S. 895 would also provide improvements in the enforcement of the act by giving the courts authority to order the payment of unpaid wages in injunction actions. I urge prompt enactment of this legislation, which has been debated and considered over an extended period of time.

President Kennedy, while a member of the Senate, expressed in compelling terms the importance to our Nation's welfare of increasing the minimum wage and extending the act's protection to additional workers. He said: "When we permit the growth of a depressed class, numbering millions, whose members cannot afford the bare necessities of life, we pay a heavy price. We undermine the general prosperity of the Nation which rests upon consumer purchasing power. We promote the spread of slums, of crime, of disease, of all the ills that grow from hopeless poverty."

Five years ago the $1 minimum wage became effective. During this period the earnings position of most workers has improved markedly. Between March 1956 and December 1960, average hourly earnings in manufacturing rose by 19 percent, to $2.32 an hour. In three of the manufacturing industry groups—ordnance, chemicals, and transportation equipment, earnings increased by about 25 percent. In some nonmanufacturing industries average earnings increased by even larger amounts. Telephone workers received increases averaging 26 percent; telegraph workers, 29 percent; and employees of gas and electric utilities, 27 percent.

The increases in the earnings of most factory workers have been large enough to both offset the increase in the cost of living and to provide the average worker with a roughly proportionate share of the benefits of increased productivity. Between March 1956 and December 1960, the Consumer Price Index advanced by 11 percent. During the period 1956 through 1960, real output per man-hour in the private sector of the economy rose by about 13 percent.

In contrast, since March 1956, workers whose wages were controlled by the level of the Federal minimum did not benefit from the upward movement of the American economy. In fact, these workers suffered a substantial decline in real earnings because of the increase in the cost of living.

A minimum rate far in excess of $1.25 an hour would be needed to insure that the families of low paid workers enjoy a decent level of living. The Bureau of Labor Statistics estimated that in the autumn of 1959 a modest level of living required, in large cities of the Nation, an annual income in excess of $5,000. This is the cost of the city worker's family budget. This budget was designed to estimate the dollar amount required in each of 20 large cities to maintain a family of an employed husband, a wife, and two children at a modest but adequate level of living. The cost of the budget in Washington, D.C. was $6,147, a figure somewhere in the middle of the distribution. Thus, a worker would have to earn more than $3 an hour to afford an adequate level of living in Washington. A minimum wage of $1.25 an hour would cover less than half of the budget which was considered modest in 1959.

It may be asserted that many of the low paid workers are marginal workers who receive low wages because they are slow or are handicapped or are trainees. The low paid employees are workers who are employed in the Nation's basic industries, in establishments where low wages are paid to most employees. The majority of them are experienced workers and there is no evidence that their age distributions or their degree of skill differs from that of workers in higher wage plants.

The schedule of minimum rates provided by S. 895 represents a careful study of the impact of the rates, the economic situation, and the desirability of being certain that the minimum rates will not adversely affect employment.

Although the increases provided by the bill are moderate, they will be of substantial benefit, to low paid workers. A covered worker who is now paid $1 an hour and has a full-time job may earn $2,000 a year. Such an income does not provide his family with even a minimal existence. The amendments would raise his income to $2,300 the first year, to $2,400 the second year, and to $2,500 the third year and thereafter.

The earnings of the 4,333,000 workers who would be brought under the act for the first time, particularly the 2.9 million who are employed in retail and service enterprises, tend to be lower than the earnings of presently covered workers. About 804,000 of the 4.3 million newly covered workers are paid less than $1 an hour.

In view of their relatively low earnings, the bill would provide a $1 minimum rate for newly protected workers, commencing 4 months after the date of enactment and continuing for 1 year. This would be increased by only 5 cents during the second year. During the third year the rate would be $1.15, and the $1.25 rate would become effective beginning the fourth year. Thus, employers would have more than 3 years in which to make a gradual adjustment to the $1.25 rate. This moderate step-by-step approach is proposed to make sure that the extension of minimum wage protection will not unduly hamper business and will not have adverse employment effects.

Although the initial minimum wage for the newly protected employees would be only $1 an hour, many of these workers would receive significant increases in earnings. For example, almost 200.000 of the 804.000 workers are now paid only 75 cents an hour or less and their wages would be increased by one-third or more. An employee who is now paid 75 cents and works 2,000 hours a year has an annual income of only $1,500. This merger amount would be gradually raised to $2,500 after the third year. This is, of course, inadequate today and it will be inadequate 3 years from now. But at least it is an improvement.

It may be alleged that low-paid workers in the retail and service industries are not the primary supporters of families. Actually, a large proportion of them do have families to support. In fact, we estimate that more than half of the hours worked by the 804,000 workers paid less than $1 are worked by persons who are primary supporters of families. Others of the low-paid workers, especially the part-time workers, contribute to the income of families headed by low-paid workers. The Department's studies show that a wife is most likely to work if her husband's income is low.

The deliberate and moderate character of the legislation is demonstrated by the fact that during the first year after the effective date no overtime requirements would apply to the newly covered workers. This is designed to permit employers to adjust gradually to the provisions of the act. However, after 1 year, all but a few categories of these workers would also receive maximum hours protection. These employees would then be entitled to time and one-half for hours in excess of 44 in a workweek. The basic workweek would be reduced to 42 hours 2 years from the effective date and to 40 hours after 3 years. It is expected that employers will adjust to the maximum hours requirement by reducing the length of workweeks rather than by paying an overtime premium for long workweeks. Employees' hours will be rescheduled and workers' time will be more efficiently utilized so that employers will not have to pay premium rates except under unavoidable circumstances.

For presently covered employees in Puerto Rico and the Virgin Islands the bill would provide percentage increases in wage order rates equivalent to the increases in the hourly minimum for employees on the mainland. However, with respect to any industry in which these percentage increases might result in curtailing employment, different rates could be recommended by review committees to be appointed in accordance with the procedures outlined in the bill.