such a higher rate, without contributing to inflation, unemployment, and higher prices generally, but also as to the impact on low wage employees, many of whom find themselves harmed by a drastically higher minimum wage.

In addition, we urge the Subcommittee not to compound the harmful effects of minimum wage legislation by expanding coverage of the Fair Labor Standards Act. We recommend that coverage and exemptions be retained at their present levels. The unfortunate plight of all too many young people who are unsuccessful in finding employment, and in becoming full partners in our economic life, ought to be dealt with by the Subcommittee. There is no doubt that the minimum wage is a major contributing factor to the high level of teenage unemployment. Accordingly, the Subcommittee ought to recommend the enactment of a Youth Opportunity Wage.

We also urge the retention and expansion of the current student wage provisions contained in the Fair Labor Standards Act. The student wage provided therein should be expanded to as broad a range of industries as possible and administrative red tape should be cut to a minimum to encourage employers to hire students in those situations which would not cause adult unemployment.

Senator JAVITS. Fine, and Mr. Chairman, may I have leave, with the Chair-the chairman and I sponsor a bill, too-to make the request of both the chamber and the federation in the same terms so that we may-and give some time limit within which we need this information.

The CHAIRMAN. It might be good to advise the federation that this is coming up and we can start they can start working on it now.

Senator JAVITS. Exactly, at the same time. Because I think if we had both sets of figures, it would be helpful to all of us. Then individual members, if they wish, could perhaps get detailed information in their States and challenge it there.

But in any case, we would have the two opposing parties in this thing, and there is no-there is no begging the question.

The fact is, Mr. Chairman, that this is what has deadlocked the hope of getting a higher minimum wage. Whatever may be their formal testimony, and so forth, I am confident that we can get a higher minimum wage, probably the $2 figure, if this block were removed. So I think it is our duty to at least have the facts.

Senator TAFT. Mr. Chairman, I would like to just point out that there has, I feel, been a very considerable degree of compromise already to the drafting on S. 1725 on the question of the youth differential.

For instance, we put a limitation of 180 days on the bill. It seems to me that is the wrong way. We have been unable to get any degree of compromise from the other side insofar as the youth differential item is involved. Organized labor should take a good, hard look as to whether or not the effect upon them is in any way going to be adverse.

S. 1725 also, of course, provides authority for the Secretary to issue regulations insuring that the youth subminimum not create a substantial probability of decreasing full-time employment of adult workers, which gives the Secretary broad authority.

I am sure that the Secretary would be very careful to observe that the regulations are strict.

I think the only danger and the only objection that organized labor has to the youth differential is as far as the danger to adult employment would be concerned.

The CHAIRMAN. Senator Hathaway, we have reached the time for benediction, here. Do you have anything to add?

Senator HATHAWAY. No, I don't, Mr. Chairman. Thank you.
The CHAIRMAN. Thank you very much, then.

We now have the first of three panels. Mr. Eugene Keeney, president of the American Retail Federation, Ms. Marjorie Geerlofs, senior vice president of Bambergers, W. V. Ramsey, representing the Associated General Merchandising Chains, and Kenneth McCarthy, the financial vice president of Yonker Brothers, Inc.

All present and accounted for?

Mr. KEENEY. All present and accounted for, Mr. Chairman.

The CHAIRMAN. Will you introduce yourselves and we will be pleased to have your statements.

STATEMENT OF EUGENE KEENEY, PRESIDENT, AMERICAN RETAIL FEDERATION

Mr. KEENEY. I am Eugene Keeney, president of the American Retail Federation. We want to thank you for the opportunity to present testimony today.

Retailers have been invited here today to discuss amendments to the Fair Labor Standards Act. With me at the table are three able retailers. Ms. Marjorie White Geerlofs-and for the record, please correct the spelling of her name. It is G-e-e-r-l-o-f-s. Ms. Geerlofs is the senior vice president of Bambergers in New Jersey. Mr. W. V. Ramsey is to my immediate left, a merchant from Mountain City, Tenn., and former president of the Tennessee Retail Merchant Council. To my extreme left, Mr. Kenneth McCarthy, the financial vice president of Yonker Brothers, Inc., of Iowa. He is also president of Iowa Retail Federation.

The views they express will be those of retailing in general. Retailing is one of the largest industries of the United States employing nearly 11 million people. This committee has asked for testimony representative of a broad spectrum of retailers. The American Retail Federation is now composed of 31 national retail associations and 50 State retail associations.

The views of these associations, as well as many individual retailers, have been sought in developing the position set forth by this panel today.

Mr. Kenneth McCarthy will be the first to present his statement on minimum rates being considered by this committee. Second, Mr. Ramsey, from Tennessee, will discuss the $250,000 exemption in retailing, and finally Ms. Geerlofs will be discussing the 40-percent duty tax for executive administrative employees in retailing.

First, Mr. McCarthy.

STATEMENT OF KENNETH MCCARTHY, FINANCIAL VICE

PRESIDENT, YONKER BROTHERS, INC.

Mr. MCCARTHY. Thank you.

Mr. Chairman, I appreciate the opportunity to be here this morning to speak on behalf of Yonker Brothers and retailing in general. I would like to have my statement entered into the record, if I might. But I would like to maybe paraphrase the statement and make some additional side comments as I go along.

The CHAIRMAN. All right, Mr. McCarthy, it will be included in the record. We are pleased to have your summary.

Mr. MCCARTHY. Thank you.

The level of the minimum wage rate and the extent or degree of adjustment to changes in it have always been so important to retailing that a brief explanation is in order.

Retailing has been described as "labor intensive." Historically virtually all branches of retailing have used one-half of the difference. between the cost of merchandise and the retail price for payroll. I am not going to go into the differences within the two bills because obviously you gentlemen are familiar with it.

Previous testimony has talked to the matter of the ripple effect of the increased minimum wage. The ripple effect is the effect that raising the wage rates in the lower strata of the economy has on the levels above it.

A raise on the minimum wage of $2, for example, would cause an immediate demand by the employees previously at the $2 level to an increase in their own wages, in their own wage levels, an increase of 40 cents, or, as is many times the case, an increase on an equal percentage basis, 25 percent of $2, or 50 cents.

It is clear that the raise in the minimum wage itself is only the tip of the iceberg. Historically the relationship between the minimum wage rates and other pay levels has not changed.

For this reason, there is no such thing as legislating only those rates now at or below the current minimum.

This process of adjustments over the entire range of rates produces a virtually universal concern among retailers and other businessmen that whatever changes are made in the wage rate, they be stretched out sufficiently to permit gradual rather than sharp changes.

A relatively smooth curve of increases, therefore, as contained in 1725 is less disruptive for the economy than an immediate 25-percent increase to $2.

The actual cost to retailing can be estimated by the statistical information presented by the Department of Labor. In their report, section 4, the 4D report estimated that of the retailing employees covered by the minimum wage, 1.6 million were making from $1.60 to $2.20. Somewhat more than a third of these 1.6 million workers, or 567,000, were paid at the current $1.60 Federal minimum wage level.

Based on this information, it would cost the retail industry $425 million per year with a raise in the minimum to $1.80; $850 million with a raise to $2, and $1.274 billion with a raise in the minimum rate to $2.20.

None of these figures take into account the ripple effect which has already been discussed or the employees making more than $1.60 but less than $2.20.

Past experience in retailing has indicated that for every dollar spent in coming up to the minimum, approximately another $2 is spent in accomodating the higher wages to the minimum. The ripple effect is immediately felt since employers cannot raise the minimum wage of affected employees without considering at the same time the wages of their superiors on other jobs within the store.

It is for this reason that retailers urge the committee to allow at least 60 days after enactment before compliance is required, so that the retailers can compute and give all the wage increases which immediately flow from the raise in the Federal minimum.

Within the last few days in my own company we have made some analysis of our payrolls, and the figures which we have come up with exclusive of the ripple effect-and I do want to emphasize that point, too, that this is exclusive of the ripple effect-but to raise our wages to a $2 minimum would cost us one-half million dollars on an annual basis.

In fairness to our 2,800 stockholders, we would have to take immediate and drastic steps. I might add, included in our stockholders are a number of so-called "little, old ladies from Dubuque," who own

50, 100, and 200 shares of our stock. In some cases they look on us almost in the same light as A.T. & T.

We would have to come up with some alternatives. These alternatives would include raising our margins of profit on our merchandise to increased markups, which, of course, would mean increased prices to the consumer.

Another effect, another alternative, would obviously be to reduce the number of employees. The first ones to go would have to be marginal employees who we are in many cases carrying now.

We would also have to suggest retirement to employees who are no longer productive but who we are also presently carrying. We also could go and give less service, and go to more self-selection.

The last step we would have to do would be to close some marginal stores. At the moment, frankly, in our 21 stores we have 4 stores which are marginal. Two of these would be immediate prospects or prime candidates.

One, for instance, is in Oskaloosa, Iowa, and another is in Ottumwa, Iowa. But I have to state, really, that we are not only talking about Oskaloosa, Iowa, or Ottumwa, Iowa, as far as this point is concerned, because I feel from my own knowledge of retailing in my area that we did a respectable job in retailing, and that these same things would happen to stores in Missouri, Nebraska Illinois, and Maine.

This would happen across the country in stores which are marginal. They could not possibly afford to stay with the increased large minimum to $2.

There has been much controversy on the effects of the minimum wage on employment. The debate has revolved around the relative benefits of a raise in the minimum wage for marginal employees versus the cost-benefit ratio of hiring such employees where there is a raise in the wage rate.

In 1969 the American Enterprise Institute for Public Policy Research published a study on the "Employment Effects of Minimum Wage Rates." Some of the conclusions reached by this study should be of interest to this committee:

The impression created in most government studies that Federal minimum wage policy has produced no adverse employment effects is erroneous.

The weight of the evidence produced by academic research is that adverse relative employment effects are related to the relative wage impact of statutory minimums.

Minimum wage rates produce gains for some groups of workers at the expense of others, with the adverse employment effects greatest among workers who are the most disadvantaged in terms of marketable skills or location. The unqualified claim that statutory minimums help the poor must be denied.

And this again would go back to my point of the first people that we would have to look to remove from the payroll would be these marginal type employees or the ones who are no longer producing. No matter what you do in the way of legislating minimum wage rates, the retailer will have to pay half of his margin out in employee wages. The added cost, therefore, to the retailer must be regained in some other manner. It is virtually impossible for a retailer, especially a small store owner, to absorb, even for a short period of time, this loss in profit because of the relatively low profit margins realized by retailing in general and small stores in particular.