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PARAGRAPH 451-BOOTS AND SHOES.
BRIEF OF SALOMON & PHILLIPS, NEW YORK, N. Y.
New YORK, N. Y., February 6, 1913. Hon. Oscar W. UNDERWOOD,
Chairman, Committee Ways and Means, Washington, D. C. DEAR Sır: Permit us to call your attention to the fact that on account of the duty at present placed on the articles known under the leather schedule as sealskins and moroccos, which come under the term of “Leather not specially provided for” at 15 per cent duty, this duty has prohibited competition in these articles.
For that reason the use of sealskins has been discontinued in such articles as shoes and slippers wherein this article was very largely used in years gone by.
Such articles as hair seal, goat and calf, by reason of the duty placed on them at the present time, can not be imported in this country, and these articles are being made by one or two concerns who practically control the output.
On account of freight charges and other necessary expenses combined with the duty, places the domestic leather in a noncompetitive class.
The 15 per cent duty on this leather is practically prohibitive and you can glean from statistics, if examined, that practically nothing in the way of sealskins has come into this country since this duty has been in effect.
We think that a reduction of duty should be made on all finished leather for the best interests of all concerned.
We do not ask for the removal of duty on goods which should be protected, but what we would like is a competitive market, reasonably competitive, and no doubt the idea of your committee is to at least have fair competition and not have the whole trade gathered up by a few protected manufacturers.
If it is the idea to reduce the general line of leather, we hardly think it fair to leave a clause which will retain certain leathers at the present rate. Respectfully submitted.
SALOMON & PHILLIPS.
BOOTS AND SHOES.
TESTIMONY OF JOHN F. TOBIN, PRESIDENT BOOT AND SHOE
The witness was duly sworn by the chairman.
Mr. Tobin. Mr. Chairman and gentlemen, it appears to me that the honorable gentlemen of the committee, as well as the gentlemen who have been presenting this case, have dwelt entirely too much upon the retail price of shoes in their effort to bring this question before you forcibly.
A very large percentage of the shoes sold abroad are sold by manufacturers retailing them from their own stores in foreign countries, which enables them to get the profit that usually goes to the manufacturers plus the profit which usually goes to the retailer. In this way they have been able to invade the foreign markets.
Very few of the American-made shoes are sold in the competitive market in foreign countries because the retailers in those countries have a prejudice against American shoes and prefer to buy the shoes that they have been accustomed to purchasing.
This whole question of the proposed removal of the tariff on shoes is based upon the supposition that the consumer is going to be benefited in proportion to the amount of reduction in the tariff. I maintain, in behalf of the organized shoe workers of this country, that no such result will follow from the entire abolition of the tariff.
The CHAIRMAN. Mr. Tobin, that is not the first proposition. The first proposition is for the Government to get some revenue. The other is a secondary proposition, that the consumer may be benefited.
PARAGRAPH 451-BOOTS AND SHOES. Mr. TOBIN. If the Government wants a revenue at the expense of the daily and weekly earnings of the shoe workers, in our loyalty to the Government we will yield a portion of our wages, but I do not believe that the voters of this country have registered their approval of a policy which takes the tariff off shoes and leaves the wage worker in the shoe trade of this country subject to that keenest of compe tition between manufacturers which prompts them to fix their wages at that level.
Bear in mind this fact that the shoe manufacturers of this country, fully two-thirds of them or more, are running factories which they call open factories in which they set up the contention that they are going to run their business in their own way and without any interference from any outside source, meaning in plain English that they will make their conditions of labor, the wages which they pay, based upon what they themselves believe to be a fair rate.
The gentlemen who believe in the open-shop policy so-called, in their zeal to manage their business in their own way, sometimesyes, frequently, if not always-overstep the bounds and go to the extent of managing and directing the interests and welfare of the men and the women who work for them.
I have not the slightest objection in the world to any shoe manufacturer, or any other kind of a manufacturer, running his business in his own way. But I object most strenuously to him managing my business and my domestic affairs and my standards of living for me. I may be inferior to him in my, ability to manage my business, but I want to manage it even if I mismanage it. And the large manufacturers to-day, who are operating what are called union shops, make scales of wages with the union, with arbitration as a safety valve. What I mean by that is that they will make their scale of wages with the union by mutual agreement, sitting down across the table, and if they fail to agree then they submit their differences to a board of arbitration, and the decision of that board is final and binding upon all.
Those manufacturers and those workmen who are employed in such factories are subject to the competition which comes from those gentlemen who operate their factories in their own way and without any interference from any outside sources. Those manufacturers with whom we deal are obliged to meet that competition, and in making our wage scale we are obliged to take into account the wages paid in so-called open shops.
If this tariff is removed. I maintain there will be no reduction in the retail price of shoes, but there may be a substantial reduction in wages. Even if the manufacturer does not suffer any impairment of his profits, advantage will be taken of that argument as a reason for reducing wages. That is the thing we fear, and the organized shoe workers will have to measure their wages by that general reduction which would follow from that excuse.
I have prepared and have here a table by which I am going to try to show you gentlemen why I base my conclusions that there will be no reduction at all in the retail price of shoes. I ask you to follow me closely in these prices which I will enumerate so that you may possibly understand what I am driving at, and if not I will be pleased to answer any questions.
PARAGRAPH 451-BOOTS AND SHOES.
The present wholesale price of a pair of shoes for which the dealer pays 75 cents is $1 as a retail price. The retail price of shoes is fixed by the retail shoe dealer in multiples of 25 cents and nothing less on the cheaper grades of shoes. On the next grade in multiples of 50 cents, and in the next grade a dollar, and the next grade higher still to $2. There are no cutting of figures less than 25 cents, so that the 75-cent shoe at wholesale is retailed for $1.
Removing the tariff on that shoe, which is a shoe made of bovine hide, which would be 74 cents, would make the cost of the shoe 677 cents, providing it is sold minus the tariff, and the retail price of that shoe for which the dealer pays 674 cents will be $1 and not 92} cents, as we suppose, if the tariff is abolished.
The next grade of shoe is 90 cents. The retail price of a shoe for which the dealer pays 90 cents is $1.25.
The removal of the tariff makes the price of the shoe at wholesale 81 cents. The retail price is still $1.25, because there is no breaking of that quarter. The price of that shoe would not be $1, because that would not yield the retailer a sufficient profit.
Now, bear in mind, that when we are talking about the margin which the retailer—the shoe dealer—apparently has, this fact ought to be taken into consideration, that the retailers are not getting rich. They have a very precarious existence. Very few of them are successful.
Now, you go on down through the list with a shoe wholesaling at $1.15, $1.50, $1.90, $2.25, $2.60, $2.75, $3.15, $3.25, $3.75, and $4.25, showing the retail price in each case, and I will not burden you with all the figures in connection with the discounts on account of the removal of the tariff. It runs up on shoes retailing for $7, the present wholesale price of which is $4.25. Minus the duty, it would be $3.83, although the retail price would still be $7, and I draw your attention to what I allege to be a fact that in the higher grade shoes there is less likelihood of a reduction in the retail price because of the removal of the tariff. If it were probable that the retail price of shoes would be reduced in proportion to the entire amount of the tariff, we would, perhaps, have very little argument in support of our contention; but we have found by experience that the price of shoes at retail has been steadily advancing, due, first, to the increased cost of material and also to the increasing necessities of the retailers. They are looking for more money, and, of course, they must have more money to meet the higher rents and higher costs of living which we all suffer from.
The above wholesale prices may vary a few cents up or down with different manufacturers, but these will not change our figures as to retail prices.
In support of our conclusions relative to the fixed quantity of retail prices for shoes, I quote the following from the Boot and Shoe Recorder, published in Boston, Mass., under date of December 4, 1912, from the pen of Mr. E. W. Smith, president of R. P. Smith & Sons Co., Chicago, Ill., large jobbers of shoes:
That blind adherence to old traditions which has caused the average shoe retailer to ask no more than $5 for shoes which cost him $3.25 has been the ruin of many a merchant. It is as easy for a good salesman to get $5.50 as it is for him to get $5, especially PARAGRAPH 451-BOOTS AND SHOES. if he is working with the courage of the conviction that he is giving good value. The American people advocate good profits. They want no man to fail, but would rather see him successful. They want good shoes and are willing to pay for them.
This, gentlemen, is an authority on shoe retail prices.
The CHAIRMAN. Mr. Tobin, your time has expired. How much time do you need to finish what you have to say ??
Mr. TOBIN. Oh, I could possibly finish in 10 minutes.
The CHAIRMAN. The rule of the committee has been to allow each witness 10 minutes, but we have a great many other industries here that have to be represented. I think there are a hundred witnesses here, and we have only gotten through with six. I do not want to interrupt you
Mr. Tobin. My information is that I would be allowed a half an hour.
Mr. PAYNE. Suppose this committee should take this 10 per cent duty off of foreign shoes imported here, in your opinion would those foreign shoes sell any cheaper to the homě consumer? Would not the duty be absorbed through the foreign manufacturer, the wholesaler, and retailer?
Mr. Tobin. Yes, sir; absolutely.
Mr. PAYNE. I asked that because I think, perhaps, I have had more widely extended experience in reducing duties than any other man in this generation, and I have found it inevitably true that if you take the whole tariff off it will go into the pockets of somebody else.
The CHAIRMAN. Mr. Tobin, do you think another 10 minutes will suffice ?
Mr. Tobin. I shall endeavor to finish within that time, but I am somewhat disappointed, because I understood that my allotment was a half hour.
The CHAIRMAN. As I explained to-day, the committee, in all of these schedules, determined to divide the time between the witnesses and give them allotted time in advance; but we found that the number of witnesses coming here was a greater deal larger than we expected, and that it was impossible to maintain that. However, realizing that you want to present your side of the case, with the unanimous consent of the committee I will give you more time. Do you think 10 minutes will cover it?
Mr. Tobin. While speaking, I am not able to measure the time, but I hope you will remind me when my time has expired.
The CHAIRMAN. The witness has asked consent to proceed 10 minutes further. Is there any objection? [After a pause.) The Chair hears none.
Mr. LONGWORTH. I want to ask you one or two questions, Mr. Tobin.
The witness before you, Mr. McElwain, who is a practical shoe manufacturer, when I asked him the various items of cost of making a pair of shoes, gave these as his estimates: The cost of material, 60 per cent; the cost of maintaining machines, 21 per cent; the cost of overhead charges, 101 per cent; and the cost of labor, 28 per cent. Those are in round numbers. You are a practical shoe worker, are
Mr. Tobin. Yes, sir.
PARAGRAPH 451-BOOTS AND SHOES.
Mr. LONGWORTH. Do you agree with his statement as being a fair statement of the various items in the list ?
Mr. Tobin. There is only one item there in which I would be justified in making any statement upon, and that is the one with reference to labor.
Mr. LONGWORTH. Yes.
Mr. Tobin. I do not know what Mr. McElwain's cost would be, but the cost to make a shoe in the Brockton Shoe Factory, for example, which is the largest shoe center in the world, is estimated at 174 per cent of the retail price; so that a shoe that retails at $4 would pay a wage
of four times 171. Mr. LONGWORTH. Then, you put the labor cost at from 17 per cent up? Mr. TOBIN. On the retail price. I do not know how Mr. McElwain
I gets his figures.
Mr. LONGWORTH. No; that is his factory price.
Mr. LONGWORTH. Well, generally speaking, if it was 17} per cent of the retail price, that would bring it up to something like 30 per cent of the actual cost of producing it.
Mr. TOBIN. Yes; that is near enough.
Mr. LONGWORTH. Do you think 30 per cent of the cost of making the average pair of shoes is labor-the actual cost; not the retail cost?
Mr. TOBIN. I am not able to say, because I do not know what wages are in many factories. That is something we are not able to get, except in factories in which we have organizations. Mr. LONGWORTH. Then, I can not ask you the question I intended
you are not certain as to the labor cost. Mr. TOBIN. Well, it would be impossible for anybody to be certain, except the manufacturer in that particular factory. They guard those figures very jealously,
Mr. LONGWORTH. Then, let me ask you another question: Are you familiar with the question of the price of shoes at home and abroad? Mr. TOBIN. In a general way.
Mr. LONGWORTH. Do you believe that, generally speaking, American shoes are sold abroad cheaper than they are at home?
Mr. TOBIN. I do not think they are, but even if they were, it would be in conformity with the general practice prevailing in the retailing of shoes in any particular country. For example, if a retailer in this country feels that he must get $1 a pair profit on a $3.50 shoe, the foreign retailer might be satisfied with 75 cents or even 50 cents; so that the manufacturer making shoes in this country and retailing them in his own stores in the old country would have to conform to that measure of retail profit, and if American shoes sell in England or any place else at a less price than they are retailed for in this country that is no reflection upon the manufacturer here. He is simply taking it out of the retailer's margin in selling in the old country. That is the reason why I reached the conclusion that,