The other source of information on the purchase of looms was far more satisfactory. Information on the machinery bought through second-hand exchanges on conditional sale agreements was obtainable from the county chattel mortgage and conditional sales records. A tabulation was made of all such purchases by 150 of the firms covered in the canvass.

In the 5-year period beginning January 1, 1930, and ending March 1, 1935, a total of 1,232 looms were purchased on conditional sale by the 150 firms considered (table 7). If the purchases of looms by these 150 firms through the second-hand silk machinery exchanges is a representative picture of the turn-over of second-hand looms in the entire city of Paterson, it is estimated that approximately 5,000 looms were purchased during the 5-year period in this manner. As table 7 indicates, 422 looms were purchased in 1930-31, 189 in 1932, 191 in 1933, and 430 during 1934 and 2 months of 1935. The tremendous increase of such purchases in the last year is too marked to go unnoticed. About twice as many looms were purchased as in any of the previous 4 years. Table 8 indicates more clearly the effect of the depression on the purchase of second-hand looms. In the 14-month period, 1934-35, 49 separate purchases were made by firms included in the group of 150. This was more than twice as many as 1933, four times as many as in 1932 and twice the average of 1930 and 1931.

TABLE 7.-Distribution of prices paid for second-hand looms purchased from the machinery exchanges by 150 Paterson shops, 1930-35 1

1 Taken from the Passaic County conditional sale and chattel mortgage records.
Record for 24-month period from Jan. 1, 1930-Dec. 31, 1931.
Record for 14-month period from Jan. 1, 1934-Feb. 28, 1935.

TABLE 8.-Purchase arrangement on second-hand looms purchased from the machinery exchanges by 150 Paterson shops, 1930-351

1 Taken from the Passaic County Conditional Sale and Chattel Mortgage records. 2 Record for 24-month period from Jan. 1, 1930-Dec. 31, 1931.

3 Record for 14 months from Jan. 1, 1934-Feb. 28, 1935.

While sales of looms were increasing, relative prices were somewhat less. The average price paid per loom was $262 in 1930-31, $193 in 1932, $112 in 1933, and $164 in 1934–35. The looms were bought on easy payments with very little cash. The average down payment per loom was $56, while 13 monthly payments were required in 1934-35. In some cases no down payment at all was required, while terms of 24 monthly installments were not uncommon.

A few examples will indicate the ease with which looms were purchased. In one case eight looms were bought for a total of $724. No down payment was required.

The first installment of $44 was due 1 month after the purchase. The price was to be paid in 17 further monthly installments of $40. In another case four looms were purchased for $50 each. A cash payment of $50 was made. The balance was payable in six installments of $25 each. In a third instance six looms were purchased for $195. Sixty dollars was paid on account. The balance of $135 was divided into three monthly installments.

With no capital necessary for the purchase of raw material, a weaver has the added inducement of cheap rentals and easy terms for purchasing looms to aid him in opening a small commission weaving shop. At any time a person can start a 4-loom shop with a capital of $250. An 8-loom plant can be started with $375.

h. Income of commission weavers.-An estimate of actual income of the workers in the small Paterson shops is extremely difficult. To compare the earnings of these workers with those of employees in standard mills, it would be necessary to get the gross revenue of the shop and to deduct from it all costs other than labor. To make wages ultimately comparable, it would be necessary also to deduct whatever would be fair wages for the time put in by the owner-workers in excess of regular working hours to take care of the work involved in management. In the small shops having employees in addition to family members, while there is always the claim that regular wages are paid, there is no certainty that this is done and the closeness of relations between owner and employees would make enforcement of even the code minimum provision practically impossible.

The problem of arriving at actual worker income is further complicated by the fact that the proprietors of these small shops are ignorant of most of the principles of accounting. They are apparently unaware of the fact that such items as depreciation are actually being incurred and in one way or another must be paid by the owner of the mill. To arrive at a fair estimate of net labor income per worker some deduction would have to be made for this and similar overhead items. Some examples of the operation of these family shops may serve to clarify the picture. Shop 8 has 20 looms. It runs one shift and employs 5 weavers, 2 quill winders and 1 loom fixer. A father, son and daughter, and 5 outsiders work there. Looms had been bought outright 3 years before at $500 per loom. Rent, power, and light costs $110 a month, but the shop owes $680 in back rent. On the week before the investigator called the shop had been busy. It had produced 2,500 yards of 50/64s and received 5 cents a yard without warping and winding, from a New York converter. The gross income received was $125.

The father running the shop reported that he drew a wage of $30 a week for weaving and managing the shop; his son, also a weaver, received a weekly wage of $25; his daughter, a quill winder, received $14.40 a week, the outside quill winder $13 a week, the outside loom fixer $25 a week and the three outside weavers received 31⁄2 cents per yard for weaving 400 yards each a week in 40 hours. The weekly expenses amounted to $186.78.

These figures obviously do not balance. Excluding the incomes of the father son, and daughter, the expenses incurred in this week's operations total $117.38. This calculation leaves out several real expense items. The looms were depreciating at a rate difficult to determine, but none the less actual. On the assumption that the life of a second-hand loom is 10 years, these looms must be depreciated at the rate of $50 per loom per year, or $4.25 per loom per month, approximately $1 per loom per week. This depreciation cost, because of the unusually high prices paid for the looms, is somewhat more than the average would be. Neglecting other overhead costs and adding this depreciation item to the expenses incurred by the shop, the total cost for the week's operations was $206.78; deducting "wages" of the family leaves $137.38. With a gross income of $125 a week, the deficit of this shop for the week in question was $12.38. These figures allowed only

$14 per week for three outside weavers when the standard wage in Paterson at the time was approximately $20 per week for weavers.

This shop, during the week in question, if it produced, as the owner stated, 2,500 yards of cloth on 20 looms, must have been running more than 40 hours. The owner's family received no income whatever unless either rent or the wages of other workers went unpaid. When it is recalled that this quality, 50/64's, is the standard Paterson product and that the great bulk of the output in the shops covered was paid for at between 5 and 6 cents without warping and winding, it can be seen that the figures for this shop are typical of a large part of this section of the industry.

Shop number 11 started in business 3 months ago. All of its workers are members of the same family; three brothers and a sister are the entire work force. The family bought 12 second-hand looms on the installment plan and opened a commission weaving shop. During the week before the investigator called, the shop had been running one shift of 40 hours and had produced 1,300 yards of 50/64's on a commission weaving basis. For this cloth, the family received 5 cents per yard, a total of $74.75. Rent for this mill is $10 a week; mill supplies, $1; expressage, $1.50; and loom installments, $12 per week. A part-time twister is employed whenever necessary at a cost estimated to average $4 a week. The actual outgo of this shop is, then, $28.50, leaving a net income of $46.25 to be divided among the family.

Although the family shop makes no further analysis of its costs they may be approximated somewhat more closely then the figures given above. It may be safely assumed that a 12-loom shop running one shift requires one-third of the time of a loom fixer. This item would cost $10, estimating the loom fixing wage rate at $30 per week. The price of the looms was not given by the family but on the assumption that they did cost the average paid for installed second-hand looms in 1934, $175 ($164 plus $11 installation charge), the loom overhead charge would be approximately $4 per week. The deduction to be made from the gross income before the net family income can be calculated would thus be $30.50.

This deduction from the gross would leave for the family, $44.25. There are four members of the family working; the remaining income, divided among these four people, would be $11.06 each, per week.

These cost analyses are based upon the assumption that the shops will run 40 hours per week, 52 weeks per year. Any reduction in this activity would, of course, increase the overhead costs and decrease the real net income to the workers. In the very nature of the case, exact calculations of the average net earnings of these workers are impossible. It may safely be estimated, however, that the average earnings are considerably below the code minimum.

V. SUMMARY OF PATERSON SITUATION

The board has thus found to exist in Paterson the condition in which neither minimum wage nor maximum hour provisions of the Code of Fair Competition are enforced or enforceable. A large number of unemployed workers, a supply of looms available for small down payment, factory space and light and power not difficult to secure, and an easy outlet through the converter-commission weaver method of marketing, all tend to encourage the establishment of many small mills. The size of the shops, their high mortality, and their mobility make direct enforcement of the code provisions against them virtually impossible; the particular characteristics of the family shop also make it difficult to determine where owner income ends and wage income begins. Thousands of looms are operating in Paterson upon this basis; no small part of the commission weaving done outside Paterson is being forced toward the same levels as those which prevai[ in the family shops.

Anyone familiar with the rayon and silk industry or any other industry in which similar basic conditions have produced similar competitive situations, will understand the serious danger now confronting the industry. This danger is no less present to the rayon and silk workers than it is to the mill owners. Wage

and hour standards cannot be maintained unless some means can be found to bring the Paterson family shops under regulation.

A study of the methods used in the clothing and garment industries for the regulation of similar sweatshop conditions has led hte Board to believe that the rayon and silk industry problem should be attacked by substantially the same means. Much of the success in the earlier years of the clothing industries' fight against the sweatshop was due to the existence of strong labor organizations and a close cooperation between employers and unions in the campaign for regulation. Although with the coming of the N. R. A. code provisions supplemented and to some extent duplicated the terms of former labor agreements, the enforcement of these provisions still depends to a very large extent upon the vigilance and activity of labor organizations and associations of employers.

There is not, in the silk industry generally, the type of cooperation between labor and management which could immediately undertake the problem of regulating the sweatshops which commission-weaving methods have developed. Employers and workers alike realize the seriousness of the evil, but they have not yet developed the practice of working together for the handling of their common problems. At the border of the commission-weaving industry, both in the dyeing industry and in the garment industry, there exist strong labor organizations maintaining regular relations with their employers. These groups might very properly be called upon to cooperate in the administering of any plan for controlling commission weaving.

The Board does not feel that there exists in the code authority the means for enforcing or administering the regulations necessary to check the sweatshop evil. This ought not to be construed as a criticism of the code authority; the characteristics of the sweatshop are such that its handling is perhaps one of the most difficult jobs in industrial government. The Board feels however that if some external governmental agency might begin the attack upon this situation, labor unions, employers' associations, and code authority might be expected to take over the job after a short time.

The specific recommendations of the Board are based upon provisions appearing in various codes of fair competition. We are assured that these proposals are proper and we are convinced that they offer a very good prospect of success if adopted.

The Board had recommended in its report on the plan for regulation of work assignments that there be created a rayon and silk adjustment board. The recommendations below contemplate the creation of a department of this Board to set up a system for controlling the Paterson and other commission weaving. Until such time as the employers' associations, labor unions, and code authority can take over this work, the rayon and silk adjustment board should be made a special agency with authority to enforce the regulations outlined below. With this understanding we recommend:

1. The code of fair competition should be amended to include the following or equivalent provisions:

(a) All converters and/or stock-carrying mills who cause their silk goods to be woven by commission weavers shall adhere to the payment of rates for such production in an amount sufficient to enable the commission weaver to pay the employees the wages and earnings provided and in addition a reasonable payment to this commission weaver for his overhead.

(b) Converters and/or stock-carrying mills who cause their greige goods to be woven by commission weavers shall immediately designate by name the commission weavers necessary to meet their business requirements. They shall confine and distribute their work equitably to and among only such commission weavers. (c) No work shall be carried on in homes or tenement houses, basements, or in insanitary buildings, or in buildings unsafe on account of fire or dangerous to health.

(d) Converters, stock-carrying mills, or other concerns giving out weaving to be done on a commission basis may add to, subtract from, or change their list of commission weavers after investigation by the code authority or the adjustment board, provided that such additions, subtractions, or changes conform to the business requirements of the converters or stock-carrying mills, and are not intended to discriminate against the commission weavers or workers, and provided further that such changes or additions are not made for the purpose of evading the established wages plus the commission weavers' overhead.

(e) In order to assure the observance of these regulations, the books, records, vouchers, etc., of commission weavers, converters, and stock-carrying mills shall be open to inspection at all times by the code authority and the rayon and silk adjustment board.

To insure the observance of these provisions, the code authority shall formulate provisions to carry into effect the purpose and intent thereof.

2. The rayon and silk adjustment board should be given authority to formulate, in conjunction with the code authority, provisions necessary to make effective code regulation of wages, and working conditions in the commission-weaving establishments, and to regulate work assignments in the family shops.

3. Converters, stock-carrying mills, or other concerns giving out weaving to be done on a commission basis should be held responsible for wages, hours, work assignment, and sanitary conditions in the commission-weaving mills working for them. Whatever regulations are placed in the code of fair competition or drawn up by the rayon and silk adjustment board should be aimed primarily at placing this responsibility upon the types of concerns mentioned.

4. The special cooperation of State factory inspection services should be enlisted in the attempt to improve working conditions in the family shops. Respectfully submitted.

W. A. MITCHELL,

Chairman.

E. L. OLIVER, Employee Representative. J. W. NICKERSON, Employer Representative.

Mr. KELLER. It is now 5:15 o'clock, and the committee will adjourn for the day; to meet tomorrow morning at 10 o'clock, at which time Senator Fitzgerald will be heard as the first witness.

(Thereupon at 5:15 p. m., Monday, Jan. 27, 1936, the subcommittee adjourned, to meet at 10 a. m., Tuesday, Jan. 28, 1936.)