TO REHABILITATE AND STABILIZE LABOR CONDITIONS IN THE TEXTILE INDUSTRY OF THE UNITED STATES THURSDAY, FEBRUARY 6, 1936 HOUSE OF REPRESENTATIVES, The subcommittee this day met at 10 a. m., Hon. Kent E. Keller presiding, for further consideration of H. R. 9072, to rehabilitate and stabilize labor conditions in the textile industry of the United States, to prevent unemployment, to regulate child labor, and to provide minimum wages, maximum hours, and other conditions of employment in said industry; to safeguard and promote the general welfare; and for other purposes. STATEMENT OF M. D. VINCENT-Continued Mr. KELLER. The subcommittee will be in order. Mr. Vincent desires to add a few points to his previous statements, and I suggest that all the testimony be arranged in one place. Mr. VINCENT. Earlier I suggested that the Government, through the Reconstruction Finance Corporation or other agency, would be justified in providing credit for the industry. I should like to add to what I said some terms which I think ought to be imposed upon the granting of such credit. Any money so loaned should be allocated and its use confined to certain definite purposes. One, of course, would be the installation of new equipment to make the equipment set-up the most efficient possible. Another condition should be that the industry member obtaining this accommodation shall utilize a part of the money in equipping himself to perform his own distribution service, in order to enable him to escape the excessively costly distribution system that much of the industry now is a victim of. Changes in industry habits and systems, like, for instance, a change in the distribution system of the cotton textile industry, are not possible, except gradually, and such loans if they were in part allocated to such a purpose and required to be so used, would insure the beginning of such a change. In order for the Government to act intelligently, each application for a loan should be accompanied by a comprehensive plan of the purpose for which the money is to be used. Moreover, the Government should provide in each instance for a survey not only of plant equipment, plant layout, market agencies and a plan for new installations, and loan allocations, but also of management. Obviously, a management that has let itself drift into conditions that now confront the cotton textile industry has been lacking initi ative and enterprise. To stimulate and develop better management, terms such as I have suggested, with other conditions which may suggest themselves, should be imposed as a condition for such loan. Mr. Chairman, also I have suggested that public money should not be used as proposed in England to eliminate or retire by purchase obsolete equipment that is now in active use, or still set-up as a part of the operating equipment. I say that for this among other reasons: Such absolute equipment has been paid for, the depreciation and the loss taken, and it should be written off. In many instances that equipment has been paid for over and over again. Reserves have been set aside for replacements, for new installations, which have not been used for those purposes. After being used solely for purposes of income-tax deductions, they have been thrown into operating capital. Needed replacements were not made. In Perhaps one of the best evidences of this fact is to be found in the excessive overhead. The industry is not suffering from labor costs so much as it is from excessive overhead. This overhead, as we find it, might not be, perhaps, called excessive if it included distribution costs, but in most instances it does not include distribution costs. The industry thus suffers a heavy handicap, as I have pointed out, in a very very costly distribution. The result is that the part of the consumers' dollar that finally gets to the mill owner is a very inadequate part. To purchase obsolete machinery rather than confine loan money to the purchase of new equipment and the development of a more direct and economical distribution system would merely be to put a premium on bad previous management practices. May I illustrate: Of the sales dollar that the industry obtains for its product only about 25 percent of it represents labor costs. other words, only 25 percent goes to labor. From that you can see that after accounting for material cost there is an overhead expense that cannot be justified by good management. This industry does have many instances of efficient, effective management. What we are discussing is the weak member of the industry. Now it may be said to you, Mr. Chairman, that we ought not to lay down standards or rules which will ruthlessly eliminate weak members. That is not the question. It is a question whether or not a minority, I will say, of management, which is weak and inefficient, shall be permitted to undermine the economy of the entire industry. Furthermore, it must be kept in mind that these weak and inefficient members amount to only a few hundred at the most, whereas we have dependent upon appropriate, practical action several million cotton farmers whose market is this industry. Likewise we have perhaps directly employed a quarter of a million workers, whose market for their labor is this industry. So that what I am suggesting is a policy designed not only to protect directly the efficient members of the industry, but a policy which will stabilize a market for the cotton farmer, and will enable the worker in the industry to obtain an appropriate standard of living. It all pulls together in one final objective, that is, an expansion of the domestic market. Any expansion of the market will accrue to the benefit of the textile industry itself, but, moreover, any expansion of the market will improve the economic condition of the cotton farmers and the workers; and after all they are a large part of the market for cotton products. Our tobacco growers, for instance, in the South have a bad market due to different, but equally uneconomic, practices. Here are the two chief props of southern economy, namely, the tobacco grower and the cotton grower, that are both victims of industrial practices that have literally shot the foundations from under their income and standards of living. While I do not hesitate to recommend Government credit, Government loans, to any extent that may be necessary, I would limit those loans to specified purposes. First to new equipment. None to purchase again the obsolete equipment for which it has paid itself repeatedly. Next to the development of a distribution system which will rescue the industry from control by a small group of houses in New York City which are now literally overlords dictating conditions under which the cotton-textile industry shall live. In these statements I am speaking of facts with which members of industry are quite well informed. In fact when the public is not looking on and listening they do not challenge these facts. Finally on this subject may I indicate how serious the situation is: A considerable portion of equipment in the industry is 10, 15, 20 or 25 years old. When we begin to reequip the industry we have, as was pointed out, a stimulus to the movement of the durable-goods industries, again beneficially affecting employment. Mr. Chairman, that is chiefly what I desired to follow up and add to what I had already said. If I may be permitted another moment or two, I should like to refer to one of your specific questions propounded the first day I was here. It was respecting code administration and the effect of it. I believe another member of your committee asked whether the National Recovery Administration did not collapse because it failed to perform its function. I will call your attention to the January 31, 1936, issue of Knitted Outerwear Times which contains a very illuminating editorial, a few brief sentences of which I desire to read. May I preface this by saying that this is one of the textile industries, one of the related industries, which manufactures knitted outerwear. It employs more than 40,000 persons. It has some 1,400 members. It has an annual turnover in business ranging from $150,000,000 to $175,000,000. During the period of code administration it was one of the most effective in administering its code. It had an exceptionally able executive director and while we had the usual administration problems and difficulties, we found the industry quite cooperative and the code administration quite successful. I know these facts because this code. was one of those under my administrative charge. I was for quite a period deputy administrator in charge of all apparel divisions. Later I was division administrator in charge of textile industries in addition to the apparel industries. This is what the editorial says, among other things [reading]: A lot of bad things have been said about the National Recovery Administration since last May. And many of them have been true. That national effort had its defects. Nevertheless, its merits are still being acknowledged. We think it most highly significant that, despite all the critical vitriol that has been thrown at the codes, whenever a manufacturer wishes to impress a buyer or the general public with the high character of his standing and the sterling legitimacy of his practices, the first assertion is that he is still maintaining “code conditions." If the codes were really quite as evil as so many critics insist they were, such an acknowledgement of their high merit today would be something of a puzzling contradiction. Further on this occurs: We draw the conclusion: That way down deep in the conscience of American business, is the enduring belief that respect for the labor and trade practice standards fixed by the codes was a mark of decency in human relations and of economic good policy. Finally, I desire to read this further extract from the editorial [reading:] There may have been vehement objections to the elaborate administrative mechanism that was required to make the preservation of these standards a matter of law. But the desirability of those standards is unimpeached today. Certainly it would be a grave error for anyone to conclude that the destruction of the N. R. A. meant a destruction of the value of the unity which industry may create for itself by honoring the same ideals. Mr. Chairman, there is the expression of an industry. Moreover it is a judgment that is entertained by many members of other industries who, unfortunately, are not in position to be as articulate as some of the larger industries whose industrial leaders have better access to public communication. I thank you for giving me this time. Mr. KELLER. While I was out did you make clear your idea of the extent to which Government control can rationally be exercised over business? I tried to ask that question yesterday but did not get to it. In other words, I have gathered that you have an idea of limited control. Mr. VINCENT. Yes. Mr. KELLER. If you will be kind enough to tell us what sort of control we can exercise, to what extent it can be exercised, I would appreciate it. I want your judgment on that subject. Mr. VINCENT. First let me say that market practices have developed changes which so affect price making that industry is entitled in some instances to relaxations of existing law. I think it cannot be questioned that where market practices can be standardized, made uniform, within an industry, and the consumer protected at the same time against a rigid price structure, industry should be permitted to develop such practices. Mr. KELLER. What I was trying to get is this: Is industry in such position at the present time to control itself to its own advantage and the advantage of the remainder of the country without Federal control? Mr. VINCENT. I cannot answer that. May I continue to say that it is equally necessary to establish certain minimum wage standards and maximum working hours. Industry is not in position to impose such controls upon itself, because it has no compulsory power over those of its members who will not adopt the standards deemed desirable. Moreover, on the subject of limitation of machine-hours, control of production, I have no objection to those devices when they are limited to emergency purposes. The objections I am making to them is when they are turned to as settled objectives. Fundamentally, in the long view, they are unsound. Taking up your question, Mr. Chairman, will you please repeat it? Mr. KELLER. We have had a great many witnesses here who have testified that the industry is not of itself in position to correct its misfortunes; that it is not able to enter into proper agreements or to enforce those agreements if entered into, having the necessity of obey |