Mr. KELLY. Now, Mr. Chairman, I believe yesterday you asked whether we had any statistical data on what effect a substantial increase in wages would have on this industry. When the codes. were being put into effect, of course, we all did not think that the code provisions were sufficient and we believed that a differential should exist and wages should be considerably higher. We were always met with the argument that if we raised wages too drastically we would create a consumers' resistance.

Well, I will give you, if I possibly can, a picture of the ridiculousness of that statement. Everyone of us have a suit of clothes on in this room, and the great consuming public generally buys suits ranging anywhere from $18 to $22.50. Now, the cost of producing enough cloth in the textile mills for that suit is a little better than $1.20 or $1.30. The direct labor costs are about 40 cents for that, and it takes 34 yards for the average suit.

Does it not seem ridiculous that if there were a 50 percent increase in the direct labor cost of that suit, which would add approximately $1, we will say, and that is a wide figure too, that there would be any resistance on the part of the buyer when he went to the store to buy that suit?

The same thing applies in the cotton division of the industry. My colleagues tell me that first-class broadcloth shirting is selling today on the market at approximately 12 or 121⁄2 cents a yard. It takes about 4 yards of that cloth to make a shirt, and yet they have the audacity to tell us that if they increase the wages in that particular division 50 percent 4 times 12 is 48, and that would be 24 cents more on a very good grade of shirt, and yet they try to tell us that the consumers' demand would be reduced if the wages of the workers were increased.

The same thing applies in silk hose, for instance. I think the direct labor cost of making a pair of silk hose is about 18 cents, and if there were a 25 or 30 percent increase in wages it would be almost a negligible increase to the consuming public.

Where the resistance comes from is from the employer to the converter, but they try to tell us that it would come from the consumer, which they know themselves privately is not so.

Then, again, there is one more point that I want to bring out, Mr. Chairman. They do not want any regulation and yet they have the most vicious regulation, according to their own stories to me in many instances, that any industry could have. They do not own their industry, they have nothing to say about it. The man who neither weaves nor spins that owns a desk in New York, tells them how much he is going to give them for their goods, because they have inveigled the industry into such a condition that they have a constant struggle. They regulate the prices and regulate the labor and everything else in the industry, and yet when we come here for regulation of the industry that will protect them from themselves, they are down here opposing it.

That does not come from me; that comes from employers. I have talked to some employers in my own industry who will admit that they have absolutely nothing at all to say as far as what they get for their goods is concerned. They are told what they will produce them for, and, because of the condition of the industry, if they do not want to produce it for that they will go to the other fellow and he will produce it for that.

Mr. KELLER. Any questions?

Mr. RAMSPECK. Mr. Kelly, you are talking about the increase in the consumer's price brought about by wage increases. Is this not true, that under our system of doing business in this country that wage increases is pyramided? For instance, a mill sells to a selling agent in New York on a certain discount, and, therefore, he gets a percentage on that increased wage cost. Then he sells to a wholesaler and he takes a discount and he pyramids the wage cost, and every cost that goes into the manufacturing process under our system of doing business is pyramided on down the line, and when it gets to the consumer, because of the middle forces and our system of doing business it is pyramided, is it not?

Mr. KELLY. Well, it may be, but, after all, why should the workers in the industry have to work at such low wages, slave wages, because of that?

Mr. RAMSPECK. I do not think they ought. I am just trying to bring out the facts.

Mr. KELLY. I will agree that partially that is so, but invariably the employer and the converter and possibly the retailer always tell the consuming public that it is because of the high cost of labor.

Mr. RAMSPECK. The reason I brought that out is because one of the textile manufacturers in my State put the same argument up to me about the processing tax. He said that the 41⁄2 percent processing tax was not 42 percent at all when it got to the consumer, that it had been pyramided up by the various discounts being added to it. Mr. KELLY. That is right.

Mr. KELLER. But the consumer paid?

Mr. RAMSPECK. The consumer paid it, that is true. Of course, the man who handles the suit of clothes you were talking about has no more difficulty in handling it, no more work to do, if there is $1 added to the cost of it, but he takes his 10 percent or his 25 percent, whatever the profit may be in the transaction, and pyramids the increase in the labor cost.

Mr. KELLY. That may be true, there is no doubt that is so, but in the last analysis when the price of an article goes up to such an extent invariably all those interests that pyramid it say to the ultimate consumer that it is the high cost of labor.

Mr. KELLER. Any questions?

Mr. WOOD. The cost of labor in an article does not cut much of a figure in reflecting the retail price of the article?

Mr. KELLY. I do not think so.

Mr. WOOD. So the increase of wages should not necessarily increase the cost of the article or the commodity to the consumer?

Mr. KELLY. We can safely say that when the direct cost of labor is divided up into the consumer's price it is almost negligible, 10 or 15 percent one way or the other.

Mr. Woop. It is generally admitted by large employers that a 60percent increase in wages is finally reflected in about a 25- or 30-percent increase in the cost of the article to the consumer.

Mr. KELLY. Due to this pyramiding?

Mr. WOOD. Well, considering overhead and investment and all that.

Mr. KELLY. I understand that possibly it cannot be curtailed or corrected, but if those various agencies through which the goods

pass from the producer to the consumer are paid sufficiently at a lesser wage, I cannot understand why they should get an increase when the low-paid producer demands a decent standard of living.

Mr. Wood. In considering the take-off of the middleman with respect to the production of an article in a given factory-that was also brought out in the hearing in the Seventy-third Congress before this committee- -a 60-percent increase in wages on that article would finally reflect a 25-percent increase in the cost of the article purchased from the factory.

Mr. KELLY. That would all depend on what article it was. You understand that the labor costs in some divisions of the textile industry are

Mr. Wood. It is negligible, the labor cost?

Mr. KELLY. I would not say that there would be any 25 percent increase in the cost of the article.

Mr. WOOD. The trouble is that so many employers try to make the consumers believe that when there is a 10 percent increase in wages that reflects a 10 percent increase in that article to the consumer, which it does not.

Mr. KELLER. Any question, Mr. Schneider?

Mr. SCHNEIDER. I would like to ask the witness if he, or anyone representing his organization, can furnish the committee with the textile labor cost of the finished product when it leaves the mill, just the cost of manufacturing that from the raw cotton into a finished product?

Mr. KELLY. Do you mean the general cost of production-administration and investment, or just the direct labor?

Mr. SCHNEIDER. I do not want to get the high salaries in there. Mr. KELLY. You want just the direct labor cost?

Mr. SCHNEIDER. Just the direct labor cost.

Mr. KELLER. I think Mr. Gorman said that that was embodied in the general brief submitted by Mr. McNair.

Mr. KELLY. It varies. It might be 20 percent on one and 22 on another.

Mr. SCHNEIDER. That is what we want, the cost of each different grade.

Mr. KELLY. We have not broken that down. The direct labor cost will always depend upon the amount of skilled labor involved. Mr. KELLER. We can get all those statistics. Mr. Kelly, I want to compliment you on bringing out a thing that I had not heard mentioned in a good many years, and that is the fact that the manufacturers, when they came before the Congress following the Civil War, presented the facts to the Congress and said this to them: Here is a new country with 1,400,000,000 acres of land in the West still open to settlement practically free; it is not possible for us to pay the same wages in our factories and in our mines that they do in the old countries of Europe and keep men in those factories and mines so long as the free land is open to them because they will either demand a higher wage rate or they will go out to the free land.

That was entirely correct, of course, and the Congress took that view of it, taking the implied guaranty at least that they would pay the higher wages, and gave them practically prohibitive tariffs, monopolistic tariffs to all intents and purposes.

If the manufacturers and mine owners had carried out that agreement, or the implied agreement, with the Congress, and paid the

higher wages, we would not be in the position we are today for two reasons. In the first place, the farmers would have received very much higher pay for their work. The settlement of the whole country would have taken place slowly and naturally. But, instead of doing that, instead of that, as you brought out, and I want to compliment you on that because you called attention to the fact, they found it easier to keep out the pauper goods and bring the poor devils themselves over here and exploit them as they did.

It has been a part of my research recently to work that out, and I am suggesting to you that I found that the result of that has cost the laborers and farmers of this country over the period from the Civil War until the time that we finally stopped immigration into this country, probably $75,000,000,000 during that 60-year period. I call that to your attention and say to you that you have made a suggestion of very great value for this committee.

Mr. WOOD. Mr. Chairman, may I just add there that evidently many of the employers have not gotten away from that reasoning, from the fact that yesterday we had an employer here who claimed that the workers had gardens and therefore could provide their own. food and did not need such high wages.

Mr. KELLER. I heard some report on that this morning.

Mr. KELLY. Of course, the thought in his mind is this, that he wanted the workers in the Southland to work in his mill for practically nothing, just giving them enough money to see that he had enough to pay the rent, electric-light bill, and water, but nothing for food; and he was supposed to go out on the farm and earn his living; that is, get enough to keep body and soul together as far as foodstuff is concern 1

As I say, this country cannot endure under that system. Something has got to be done to prevent that. We are supposed to be all living in the United States of America. We are hearing a lot today about the great Constitution, and I am wondering if my good friend of the State of Georgia knows what the Constitution is-I should say, the State of Talmadge, because the citizens of Georgia do not have anything to do down there; Mr. Talmadge is the dictator and he does not know anything about the Constitution of the United States.

I thought one of the chief precepts of the Constitution was to give you the right of free speech and free assembly.

Then, too, there is the great State of Glass and Byrd. There is another State. Patrick Henry said, "Give me liberty or give me death." If you go into some towns in Virginia and demand the rights that Washington and Jefferson secured for us, you will be carried out on a stretcher.

Mr. KELLER. I thank you, Mr. Kelly. The next witnesses I am calling, while it is out of order, is because they want to get away this evening, and we will try to help them. I think after they have testified we will probably adjourn until tomorrow. We will call now Mr. Thomas Lawlor and follow him with Mr. Rolla Wallace.

STATEMENT OF THOMAS A. LAWLOR

Mr. LAWLOR. My name is Thomas A. Lawlor, president, Carpet and Rug Federation.

Mr. Chairman and members of the committee, I would like to say that the Carpet and Rug Federation worked under a code during the period of the N. R. A., one of the few codes, I believe, that had no

restriction whatever on machine hours. The carpet and rug workers in this country worked 24 hours a day, sometimes going to work at midnight on Sunday and working until midnight Saturday night. Along with that, we have had put into quite a few of the carpet factories the Mannett system and the Badeaux system.

I was greatly surprised here today to hear some of the members from the South talk about how the workers have been used in that part of the country, and in looking over history you will never findI know I never could find-where any human being had been followed around with a stop watch or a lead pencil and piece of paper. That is what the Badeaux system is, and the Mannett system, as well.

In the particular factory where I am employed the Badeaux system has been put into effect and the result is that wages have been reduced on particular jobs as much as 35 percent.

On top of that, on December 26 I was handed a notice from the press saying that a revision of wages must take place or the plant would close immediately. At the plant where I am employed we have been locked out since that time. They have submitted a revision of wages from 7 percent to as high as 25 percent reduction, and the Badeaux system is going to stay in the particular plant in the departments where it was established. It is not going to go any further, though.

Some of our employers have reduced wages even in defiance of the N. R. A., by getting the workers to do what they called taking a voluntary reduction in wages. That came about by threatening to close down for good or moving to some other community.

There have been cases cited to me where some of the carpet and rug workers, according to the N. R. A. must receive a certain amount of pay per week. One young lady in particular made $20 in one week and her partner did not make enough to bring the wages up to $14. The boss immediately said, "You take these two pay envelopes out and you give this young lady the $20 that she has coming. We are getting around the N. R. A."

We also have the same as they do in the other textile plants, the stretch-out.

We have one mill in the carpet industry now on strike against the Badeaux system. It is a spinning plant connected with the plant where I am employed. The wages that have now been submitted to the plant which is now locked out are going to be reduced as much as 15 percent. That is the height of the new reduction that has been offered.

The workers throughout the entire carpet industry, I might say, with the exception of one plant in Philadelphia, are always in fear of their job if they take any active part in an organization.

The workers in Amsterdam, N. Y., where there are approximately, I might say, 7,000 or 8,000 carpet workers, are browbeaten from morning until night. The bosses dare them to join an organization and they pay them just what they feel like paying them.

We feel that this new bill, if it is enacted, will cover the entire textile industry, and it will give a chance to the American people to exist as they should do.

The carpet trade up until 1921 was fairly well organized. At that particular time a reduction was put into effect, there was a strike, and men were forced to leave their homes, travel to other towns and