TESTIMONY OF HON. ALFRED B. FITT, ASSISTANT SECRETARY OF DEFENSE, MANPOWER AND RESERVE AFFAIRS, ACCOMPANIED BY CARL W. CLEWLOW, DEPUTY ASSISTANT SECRETARY OF DEFENSE, MANPOWER AND CIVILIAN PERSONNEL POLICY; RAYMOND BRAITSCH, CHIEF, TECHNICAL STAFF, ARMY-AIR FORCE WAGE BOARD; FRED BECKER, HEAD, COMPENSATION BRANCH, DIVISION OF PERSONNEL MANAGEMENT, DEPARTMENT OF NAVY; WILLIAM C. VALDES, STAFF DIRECTOR, OFFICE OF CIVILIAN PERSONNEL POLICY, OFFICE OF SECRETARY OF DEFENSE; AND WILLIAM B. MARKS, DIRECTOR, POSITION MANAGEMENT AND EMPLOYEE COMPENSATION, OFFICE OF CIVILIAN PERSONNEL POLICY, OFFICE OF SECRETARY OF DEFENSE

Mr. FITT. Thank you very much.

I am accompanied by Mr. Carl W. Clewlow, Deputy Assistant Secretary of Defense for Manpower in the field of civilian personnel policies. I would ask him to join me at the table. Others present are Mr. Raymond Braitsch, Chief of the Technical Staff of the Army-Air Force Wage Board, Mr. Fred Becker, Head of the Compensation Branch, Division of Personnel Management, Department of the Navy, Mr. William C. Valdes, Staff Director in the Office of Civilian Personnel Policy, in my office, and Mr. William B. Marks, who is the Director, Position Management/Employee Compensation, also in the Office of Civilian Personnel Policy in my office.

Mr. Chairman, gentlemen, I sincerely appreciate the opportunity to appear before this committee, and to testify in connection with the new coordinated Federal wage system. The Department of Defense has approximately 80 percent of the Federal Government's 800,000 wage board employees and, therefore, we have a very large stake in anything that affects those employees and the management of our enterprise.

In his appearance before this committee on February 6 of this year, Chairman Macy of the Civil Service Commission gave an excellent and very thorough explanation of the new program. I will attempt to avoid duplicating what he said, and instead give you a brief summary of what exists today in the Department of Defense. I will tell you about some of our plans to implement the system in the Department of Defense, and will try to give you an estimate of some of the ways in which the Department and its employees will be affected.

The wage board system originated when a statute of 1862 authorized the Secretary of the Navy to set wage rates for blue-collar workers of each naval activity to conform, as nearly as is consistent with the public interest, with those of private establishments in the immediate vicinity.

This pay fixing authority was later broadened by amendments to the Classification Act to cover wage board employees of most other Federal agencies.

The present statutory authorities for paying prevailing rates have been codified in title 5 of the U.S. Code, section 5341 for trade, craft,

and laboring employees, and section 5342 for officers and members of crews of vessels.

Two different wage systems are in use in the Department of Defense: one used by Navy; the other by the remaining Defense components. The systems were developed under then differing legal authorities to meet the special needs of the departments involved.

The Department of the Navy system evolved over a period of years from the common practices in private shipyards. At the time of passage of the act of July 16, 1862, and for a number of years thereafter, the vast majority of blue-collar positions in the field service of the Department were located in the Naval shipyards. Employees in such installations still constitute the largest, most highly organized group of Navy ungraded employees.

It was therefore logical that the Navy should adapt its practices and pay policies to those of private shipyards with which it was in most direct competition for hiring employees, and whose work most closely approximated their own activities.

The Army-Air Force system was developed in 1942 to provide a single system for use by all services of the then War Department. It was developed by a group of experts and consultants to meet the specific needs of, and in consideration of, the particular problems of all services of the War Department. The system now being used was designed to permit the integration of a great diversity of operations under a single program and to meet the particular types of organizations found in the differing elements of the War Department.

When the Department of the Air Force was established, it continued to use the system. The Army-Air Force Wage Board was formed to determine wage policy and to develop wage schedules.

Efforts have been made to bring about more uniformity between the systems on an evolutionary basis. Over the years, considerable progress has been made in achieving this objective. Steps taken include: adoption of joint survey procedures and the conduct of joint surveys; joint review of schedules to reach fullest possible comparability of wages for key jobs; adjustment of job alignment to achieve more comparability; common release of schedules; uniform number of step rates; and uniform criteria for advancement from step to step.

Certain differences between Army and Air Force on the one hand and Navy on the other hand remain. Here are some examples of those differences:

(a) The Navy has 16 pay levels; the Army and Air Force have 15. (b) There are numerous differences in the evaluation, titling, and pay of the supervisors of wage board employees.

(c) The pay spread between the first and third step rates in a pay level is 8 percent for Navy and 10 percent for Army and Air Force. (d) All of the services have different practices with regard to extra pay for special work conditions attributable to high work, dirty work, and hazardous duty.

(e) There are differences between Navy and Army and Air Force in the relative evaluation of a number of jobs.

(f) The Navy has a wage committee, with union representation, which recommends appropriate wage schedules to the wage-fixing authority. For Army and Air Force, the chief of the technical staff approves wage rates under authority delegated by the Army-Air Force

wage board. These remaining differences, of course, will be eliminated within a reasonable time after commencing operations under the Coordinated Federal Wage System.

Now let me turn to that system itself. Representatives from the Defense Department worked very closely with representatives of the Civil Service Commission in the development of the plan, and we believe that the resulting policies form a very solid framework for attainment of the long sought-after objective of uniformity of wage setting and wage rates in the Federal Government. The plan also provides a vehicle the National Wage Policy Committee-which can be used to improve the program in the future through suggestions of new and revised policies. These suggestions will be based on operating experience in the years to come and developments in wage administration throughout the national economy.

Chairman Macy has requested that the Department of Defense name three of the agency members of the National Wage Policy Committee. There will be one member from the Office of Secretary of Defense and the other two seats will rotate among the three military departments serving terms of two consecutive years. We welcome this opportunity to continue to work with the Civil Service Commission, the other departments and agencies, and the unions in improving the Federal Government's wage program.

The first step to implement the new system within the Department will be the formation of a lead agency wage committee, in accordance with the requirement contained in FPM Chapter 532. A draft Department of Defense directive to accomplish this has been prepared and is being coordinated. It is required by Commission regulations that the committee be composed of a chairman plus two management and two union representatives.

Our plan is to have a representative from the Office, Secretary of Defense, serve as the permanent chairman of the committee. The other two management representatives will rotate, depending on which two Defense components have the dominant interest in the particular labor market area schedule under consideration. At the present time, it is estimated that the Department of Defense will be the lead agency in 140 to 150 separate labor market areas.

There also will be established a technical staff of competent wage specialists and clerical assistants to carry out the day-to-day activities connected with the wage survey and wage-fixing responsibilities of the Department of Defense. It is expected that the wage specialists currently performing these functions in the military departments will be transferred to this staff.

Let me emphasize that, under this approach, there will be a single agency wage committee within the Department of Defense, as well as a single wage-fixing authority. The latter authority will exercise the responsibilities for blue-collar wages now exercised by the Army-Air Force wage board and the Navy's Office of Civilian Manpower Management.

Representatives from the Department have worked with Civil Service Commission representatives in defining the approximately 195 labor market areas which will blanket the country and be used for making wage surveys and for establishing wage rates. We understand the labor union comments on the area definitions have been received

in the Commission and are being analyzed. The definitions will be finalized after further discussion with the agencies. The completed definitions also will form the basis for designation of the lead agencies for the various local survey areas.

The Department of Defense and the Civil Service Commission are jointly conducting the study of wage board supervisory pay which Chairman Macy referred to in his testimony. During this survey, 265 industrial establishments with 5,000 or more employees will be contacted to obtain information on private industrial practice as to the differentials paid supervisors over their blue-collar subordinates. The resulting data will be used as the basis for establishing the supervisory differentials in the Federal Government pay structure, and for any supervisory job grading plan which might be developed.

Bureau of the Budget clearance has been received and revised survey instructions have been forwarded to participating departments and agencies which have been asked to contact the private industrial establishments assigned to each. Collected wage data are to be forwarded to the Army-Air Force wage board by April 30 at which time analysis will begin. It is expected that a proposed pay system for wage board supervisory personnel will be ready for adoption by July 1, 1968.

And, of course, the Department and its components are coordinating with the Commission on the development of:

(a) Conversion procedures;

(b) Wage survey and wage fixing procedures;
(c) Job evaluation standards;

(d) Pay adjustment and pay retention rules.

It is anticipated that conversion to the new system will be somewhat more difficult in the case of the Department of the Navy than for the other Department of Defense components. While not identical, the proposed Civil Service Commission job grading program is quite similar to that used by Army, Air Force, and Defense Supply Agency. The factors used to evaluate jobs are very similar and the new plan contemplates the use of a 15-level structure, the same as Army and Air Force now have. On the other hand, and as indicated previously, Navy uses a 16-grade structure, and its jobs presently are alined somewhat differently than will be the case under the Civil Service Commission plan.

At this time, it is not possible to make a precise estimate on the cost. of the new program. There are too many intangibles. We do not know what effect the new industrial classifications of real estate and wholesale trade to be included in wage surveys will have on our wage lines. They may tend to depress the lower ends of the schedules. Many of our wage areas have been redefined. These redefinitions may result in higher rates for some areas and in lower rates for others. No consistent pattern has developed thus far. Laundry worker compensation overall and Navy commissary worker compensation will go up.

On the other hand, there will be potential savings in Army and Air Force with regard to the percentage amounts between step rates. At the present, for example, Army and Air Force have three step-rate schedules with 5 percent between steps. This will be reduced to 4 percent between steps. Since it is estimated that about 70 percent of the wage board employees are in step 3, there will be a potential savings

here.

Some Navy positions--inspectors and supervisors-for example are alined differently from similar positions in Army and Air Force, and these will be realined under the Civil Service Commission system. For those positions which go down in grade, there will be pay protection for the incumbents and therefore no immediate savings. But for those positions which are alined to higher levels, there will be cost implications at once. This is more likely to occur in the Navy than in the Army and Air Force, since positions in the latter two departments already are in substantial alinement with the proposed Civil Service Commission job grading structure.

I would like to add at this point that the plan to adopt the coordinated Federal wage system does not have as its motive or one of its motives the saving of money or the reduction of wages. The plan has as its purpose the achievement of uniformity in the treatment of the wage board employees of the Federal Government. That is the sole purpose that I know of, and it's the only purpose that is governing our approach to the transition which I have described in this statement. As indicated by Chairman Macy during his testimony, the new system should be in full operation by July 1970. We shall continue to work with the Civil Service Commission to improve the system based on operating experience, developments in wage administration in the national economy, and the operational needs of the Department of Defense.

Mr. Chairman, that concludes my statement.

Mr. HENDERSON. I think the statement is well prepared and very much to the point.

I realize there is a great deal more that you might have said but it would have been somewhat of a duplication of Chairman Macy's statement. I certainly commend you for going directly to the interest of the subcommittee.

At the present time the two wage board systems-the Navy and the Army-Air Force system-both work on the principle of setting pay based on the prevailing rate in the local area of the installation. Will this be, in principle, changed under the new system?

Mr. FITT. No, sir. The principle still is to set the Federal wage board rates on the basis of comparability to prevailing rates in the area. There will be some changes in the boundaries of the areas that are encompassed in the survey, but the principle remains the same.

Mr. HENDERSON. Under the present system are there material differences between the kinds or types of private industries surveyed as between the two systems?

Mr. FITT. I don't think there is any significant difference in the kinds or classifications of occupations surveyed.

Mr. HENDERSON. Under the new coordinated system there will definitely not be any difference between the two, will there?

Mr. FITT. That's correct, sir.

Mr. HENDERSON. You mentioned on page 3 of your statement that the Navy has a wage committee with union representation and the Army-Air Force does not. I might ask what has been the reason for this, but that would lead me to a more important question: What will be the situation under the new system?

Mr. FITT. Under the new system the wage committee will have union representation as spelled out in the Federal personnel manual.