Labor Standards Act rests squarely on the opponents of broader coverage, it seems to me. I ask the members of this subcommittee in all sincerity whether they have heard any facts or arguments from these opponents that have not been advanced before, only to be proved by experience to be groundless, against improvements in the standards prescribed in the act. I feel sure that any impartial study of the record of your hearings last spring and of the record that will be made in these hearings this year cannot fail to show that the opponents of the changes we advocate have simply not sustained the clear burden of proof that rests clearly on them.

There is no sound reason why the distribution of goods should be excluded or exempted from the Fair Labor Standards Act when the production of goods and the shipment of goods in interstate commerce are generally covered. On the contrary, the need to bring employees engaged in these activities under the act is at least as great, if not greater, than the need to continue to cover under the act's protection employees who are already subject to the act.

The congressional findings and policy which provide the basic justification of the act are fully as applicable to the distribution trades as to the manufacturing, mining, transportation, or communications industries.

Has anyone attempted to argue that substandard wages, such as are widely prevalent in the retail distribution industries, do not cause "commerce and the channels and instrumentalities of commerce to be used to spread and perpetuate" labor conditions "detrimental to the health, efficiency, and general well-being of workers"? I have not heard anyone do so.

Has anyone contended that the existence of substandard wages in wholesale and retail trade does not "burden commerce or the free flow of goods in commerce" or does not constitute "an unfair method of competition in commerce"? I have heard no such contention anywhere.

Is it any less true in the distribution industries than in other industries subject to the act that substandard wages lead to "labor disputes burdening and obstructing commerce and the free flow of goods in commerce" and interfere with "the orderly and fair marketing of goods in commerce"? I think not.

No; the same factors that support the application of minimum wage and overtime standards in mining, manufacturing, transportation, and communications industries equally support the application of these standards in the distribution end of the stream of commerce.

APPENDIX

A. Comparative wage data in retail, wholesale, and manufacturing

Whereas retail and service employees were once one of the highest paid groups of workers, today their wages lag substantially behind those of other workers. Furthermore, the gap between the wages of retail employees and workers in manufacturing is becoming wider.

Between 1950 and 1955, the average hourly earnings of retail employees were increased from $1.17 to $1.52, or 35 cents. Average hourly earnings in department stores and mail-order houses rose from $1.08 to $1.33, or only 25 cents. In general merchandise stores the increase was from 97 cents to $1.19 an hour, or 22 cents. By contrast, average hourly earnings in manufacturing increased from $1.46 to $1.93, or 47 cents.

The effect of continuing to exclude or exempt from the Fair Labor Standards Act most employees in wholesale and retail trade is to keep them out of step and out of line with workers in mining, manufacturing, transportation, and communications of whom all but a very small proportion are within the protection of the act. In none of these "covered" industries, for example, are average annual earnings per full-time employee below the average for all industries. In 1953, the latest year data are available, however, average annual earnings per full-time employee were below the average for all industries ($3,599) in the fields of both retail trade ($3,092) and services ($2,650). Only in agriculture, forestry, and fisheries, where average annual earnings per fulltime employee were only $1,653, was the industry average appreciably lower than in the retail trade and service industries.

Furthermore, without a floor under wages, such as is guaranteed by the Fair Labor Standards Act to workers who are within its protection, it is apparent that minimum wages, as well as average wages, whether on an hourly, weekly, monthly or yearly basis, can and do vary widely. Even in the wholesale industry, which is one of the highest wage major industries in the country, average straight-time hourly earnings in 13 cities surveyed by the Bureau of Labor Statistics in 1952 ranged from 85 cents in Jacksonville, Fla., to $1.33 in Cleve

land, Ohio, in the case of janitors, porters, and cleaners; from 85 cents in the Norfolk-Portsmouth-Hampton Roads area to $1.50 in Milwaukee, Wis., in the case of stock handlers and hand truckers; and from 86 cents in Jacksonville, Fla., to $1.13 in Cleveland, Ohio, in the case of watchmen. As the Bureau noted, "In smaller cities the wages of these employees may be lower."

Undoubtedly, there have been increases in the level of average hourly earnings and average annual earnings in the years that have elapsed since 1952 and 1953. These changes, however, have not modified substantially the basic pattern of low wages in retail and service establishments as compared with other major industries and wide disparities in wage levels in wholesale, as well as retail, trade in the wages paid to workers in different areas and in different occupational groups.

B. Profits in retail trade

The record is that the retail trade industry can afford to pay the minimum wage and observe the other standards required by the Fair Labor Standards Act. The retail trade and service establishments that would be brought under the act, if our proposals are enacted, the large department and chain establishments, are the most profitable in the industry.

Profit margins in retail and wholesale trade compare favorably with those in manufacturing, which generally is subject to the requirements of the Fair Labor Standards Act. Loading corporations in retail and wholesale trade enjoyed an overall return of 11.1 percent on net assets in 1955, as compared with a return of 15 percent for leading manufacturing corporations. In retail and wholesale trade, the percentage ranged from 8.5 percent in wholesale and miscellaneous to 13.0 percent in chain grocery stores.

For individual enterprises, the story is the same. Appendix table 3 lists net assets, net profits, and net profits as a percentage of net assets for six large enterprises in the retail field. These include F. W. Woolworth, Newberry, McCrory, S. H. Kress, H. L. Green, and W. T. Grant. Net profits as a percentage of net assets for these six giant firms in 1954 ranged from 15.0 to 24.5 percent.

TABLE 1.-Comparison of average weekly and hourly earnings in retail trade and manufacturing, 1950–55

Source: Monthly Labor Review, Bureau of Labor Statistics, U. S. Department of Labor.

TABLE 2.-Net income of leading corporations in trade and manufacturing,

Source: First National City Bank, New York City, Monthly Letter, Business and Economic Conditions, April 1956.

TABLE 3.-Net profits as a percentage of net current assets of 6 major retail

Mr. GREENBERG. In the statement we are submitting you will find the specific proposals we are making relative to proposed changes in the Fair Labor Standards Act and we submit these proposals for your guidance and consideration.

I am aware, Mr. Chairman, that the submission of extensive, cold statistical briefs can be a tedious chore, both for those who read it and those who are forced to listen to it. I would like to take advantage of the time I have before your committee to discuss how our proposed recommendations will affect the lives of some 7 million workers, both organized and unorganized, who are employed in the retail industry. I have read and have heard it said that our Nation is at present enjoying an unprecedented period of prosperity. The following are some of the factors which are cited to prove this: the gross national product rose $1.7 billion in the first quarter of 1956, to a record high of almost $400 billion. Employment is at an all-time high of better than 64 million employed on jobs. Disposable income is at a nearrecord level.

Corporate profits after taxes in 1955 totaled some $22 billion, up almost $5 billion over 1954.

Business confidence in the expanding economy is shown by the fact that business plans to spend almost $35 billion on new plants and equipment in 1956. I suppose this could also be attributed to the fact that business interests are fairly confident of the outcome of the presidential election which is going to take place soon.

Senator DOUGLAS Don't identify a Republican victory as being synonymous with prosperity.

Mr. GREENBERG. Well, if they are going to plan to spend some $35 billion I guess they have got some advance information on the result of the election.

There is an additional phenomenon that we are gratefully observing which is that there is a growing recognition that war is unthinkable, and it is suicidal. Our Nation is engaged in an economic campaign to demonstrate to the whole world the superiority of our way of life to that of the Communists. It is my contention, Mr. Chairman, that the best way to prove this is by continuously demonstrating the high wage and living standards enjoyed by American workers.

We feel that the retail workers should be part of the picture of America which we show to the world.

Unfortunately, the exemption of the retail workers from the provisions of the Fair Labor Standards Act has resulted in a decrease in their relative standing in the community.

that will assure them at least the protection of a minimum floor under their wages and a reasonable ceiling on their hours of work.

It is our hope that these hearings will be directed primarily toward extension of the coverage of the Fair Labor Standards Act in areas where this is most needed and feasible. Nearly 20 million workers are at present outside the scope of the act. Approximately 13,500,000 of these workers are excluded because they are not "engaged in commerce or in the production of goods for commerce," as required by the basic coverage language contained in sections 6 and 7 of the act. The fields of industrial and business activity in which these workers are employed are shown in table 1.

An additional 6,500,000 workers who are excluded from the protection of the Fair Labor Standards Act are engaged in commerce or in the production of goods for commerce but are specifically exempted by some provision of the act. Table 2 shows the fields of activity in which these exempt employees are employed.

TABLE 2.-Exempt employees

Farm workers.

Employees of retail trade or retail service establishments___.

Outside salesmen___

Employees handling or processing farm products in area of production_____

Employees in laundries and dry-cleaning plants--.

Seamen

Employees in small logging operations with 12 or fewer employees___ Employees engaged in fishing, or in canning, processing, or distributing fish and fish products---

Switchboard operators in small telephone exchanges-

Employees of small newspapers---.

Employees of local transit companies_-

Employees of manufacturers or wholesalers employed in local re

3,032, 000 1,360,000 1, 203, 000

233, 000 132, 000

117,000

110,000

61,000

43, 000

32, 000 32,000

10, 000 4,000

6, 369, 000

As these figures make clear, more than a third of the employees who are excluded from the protection of the Fair Labor Standards Act is employed in wholesale and retail trade. An additional 233,000 workers engaged in handling

or processing farm products in the area of production are also excluded. Amendment Nearly 2 million of these employees could be brought within the coverage of the act simply by eliminating various exemptions included in the act. of the basic coverage language, however, is necessary to extend the act's protection to the remaining 5,558,000 workers in the retail and wholesale industry. At least four separate exemptions now specified in the Fair Labor Standards Act are applicable to employees in wholesale or retail trade. These are sections 13 (a) (1), which exempts "any employee employed in a *** local retailing capacity, or in the capacity of outside salesman (as such terms are defined and delimited by regulation of the Secretary of Labor"; section 13 (a) (2), which exempts "an employee employed by any retail or service establishment, more than 50 per centum of which establishment's annual dollar volume of sales of goods or services is made within the State in which the establishment is located. A 'retail or service establishment' shall mean an establishment 75 per centum of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry"; section 13 (a) (4), which exempts "any employee employed by an establishment which qualifies as an exempt retail establishment under clause (2) of this subsection and is recognized as a retail establishment in the particular industry notwithstanding that such establishment makes or processes at the retail establishment the goods that it sells: Provided, That more than 85 per centum of such establishment's annual dollar volume of sales of goods so made or processed is made within the State in which the establishment is located"; and section 13 (a) (13), which exempts "any employee or proprietor in a retail or service establishment as defined in clause (2) of this subsection with respect to whom the provisions of sections 6 and 7 would not otherwise apply engaged in handling telegraphic messages for the public under an agency or contract arrangement with a telegraph company where the telegraph message revenue of such agency does not exceed $500 a month."

Elimination of all of these extremely technical and complicated exemptions from the Fair Labor Standards Act would, as I have said, bring within the protection of the act nearly a million and a quarter employees in retail and service trade. It would not bring under the act, however, any employee who is not engaged in commerce or in the production of goods for commerce. These employees would still be deprived of the benefits of the act unless the basic coverage language of the act is also changed.

We are not asking, however, that all of these exemptions be eliminated from the Fair Labor Standards Act. We do not seek, for example, complete elimination of the exemption now applicable to employees of retail and service establishments under section 13 (a) (2) of the act. We seek simply a redefinition of this exemption so that, while the small local neighborhood grocery, drugstore, barbershop, shoeshine parlor, restaurant, hardware store, and repair shop would continue to be exempt, the large chain and department stores, supermarkets, variety stores, and the like would be required to pay their employees in accordance with the requirements of the act. At the same time, we see no need for continuing the exemption applicable to employees of retail establishments making or processing goods (sec. 13 (a) (4)), or the exemption for employees in Western Union Telegraph contract agency offices (sec. 13 (a) (13)), and we urge that these exemptions be eliminated from the act.

We also urge that the basic coverage of the minimum wage and overtime compensation provisions (secs. 6 and 7) of the Fair Labor Standards Act be broadened so that these provisions will apply to the distribution end of the stream of commerce, as well as to the production of goods that enter the stream, and the stream itself. As I have said, but I want to repeat, this is the principal substantial area of business activity, aside from pockets of uncovered activity in both manufacturing and transportation resulting from the act's use of the employee's activity, rather than the activity of his employer, as the test of coverage, in which the minimum standards prescribed by the act are not permitted to operate. In this connection, I would like to draw the subcommittee's attention to two very illuminating paragraphs in the memorandum on coverage and exemptions that was submitted to you a year ago by the Labor Department. The paragraphs I refer to read as follows:

"This broad scope given the basic coverage phrases in the act has not resulted in applying the act in other areas which Congress could have regulated within the broad purpose of the act but did not. The present act extends far beyond interstate commerce, which is the central core of the Federal Government's authority in this field, to apply to a whole complex of activities which precede commerce, broadly defined as production for commerce. It does not, however, extend