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did not survive in business. Both the weak and the strong were pretty much in the same relative position to each other after a price war as before. The so-called marginal producer may bankrupt himself but in so doing he drags down the producer who seeks to maintain decent standards and to conduct his business on an ethical basis.

It is my belief that employers as a class, although unwilling to advocate the passage of legislation setting up governmental regulations, do in fact welcome such laws when they are finally adopted. American industrialists are so class-conscious that they are unwilling to admit the necessity of governmental supervision even when they admit the necessity for uniform wage and hour standards in their

industries.

When the N. R. A. was abolished the National Association of Hosiery Manufacturers decided that they would adhere to the code conditions as to hours and wages by the adoption of voluntary codes. Despite their declarations in favor of voluntary enforcement we found that in the hosiery industry only a minority were willing to be bound by a voluntary code such as was suggested after the N. R. A. went out. The fact of the matter is that the employers cannot agree among themselves to regulate each other. In the nature of things competitors cannot be expected to regulate their competitors. The fact that voluntary codes were not adopted after the Supreme Court decision on the Schechter case proves that the only agency which can establish regulations for industry is a governmental body composed of individuals whose integrity cannot be questioned but who are not directly involved financially in the industry itself.

Furthermore, voluntary regulations do not work except temporarily, because most industry is so overdeveloped that a small minority group of chiselers can undermine almost any codes which are set up by the majority. This is especially true of the hosiery and textile industries, which for years have struggled with the problem of excess equipment. In the seamless section of our trade, a recent study shows, there has been almost no scrapping of obsolescent machinery. A great deal of old machinery has been allowed to remain idle, but it can always be pressed into use if an opportunity arises. The existence of this surplus equipment makes it virtually impossible to achieve stabilization in the trade without some authority to enforce uniform rules of operation.

The only possible protection against stalling our economic system by flooding the carburetor of our manufacturing system by too great a productivity at a given time is by reducing hours of operation to the point where it is possible to limit production somewhere near the average level of consumption. It is not our purpose to create scarcity. As a matter of fact during the N. R. A. period the manufacture and consumption of hosiery increased in volume. What we are seeking to accomplish is to introduce a measure of stability in the industry which will make it possible to carry on the business of manufacturing needed goods in an orderly manner which will produce a decent livelihood for the employees and fair returns to the employer.

The National Textile Act provides that under certain circumstances, and after rigid investigation and public hearings, some limitation on production may be ordered for a period of time. This action is clearly in the interest of the consumer as well as the producer. There are

no price-fixing provisions in this act, and there is no likelihood that any branch of the textile industry, which only too often sells goods at below the cost of production, will charge prices to the consumer which will be so high as to decrease sales. The public, however, is not the gainer when prices are constantly unstable. It is only too well demonstrated that buying is curtailed when prices are uncertain. During the depression years the selling price of hosiery fell almost 60 percent. The consumption of hosiery decreased rather than increased when prices went down. The volume of buying has increased during the period when prices were rising. We do not argue that if prices increase unreasonably that buying will also increase.

What we do say is that a stable demand which increases slowly and normally cannot be expected until producers and consumers can feel confident that there will be no violent fluctuations in the terms under which both will do business within a given period of time. When a serious glut of goods occurs on the market the merchants and the manufacturers become panicky and attempt to dump their stocks by cutting prices. The consumers who see prices coming down hold off buying expecting to get even lower prices. Business cannot recover while conditions remain fundamentally chaotic and no method of controlling the situation is possible.

The National Textile Commission to be set up under this act will not, we believe, assume the role of a harsh dictator. The Commission will work with the various branches of the textile industry and will only take drastic action in the most extreme cases. It is the purpose of the act to aid the industry to achieve maximum productivity. We do not anticipate that the authority which the law gives to curtail operations for a given period will be applied except very rarely.

What will actually take place, we anticipate, is that the Commission will assist the industry to establish more efficient methods of obtaining statistical data on consumptive trends which will encourage each branch of the trade to regulate itself in the most effective manner. Voluntary regulation is possible if the alternative is compulsory action. Furthermore, there is a certain fringe of producers in any industry which can only be brought into line by wielding a big stick. The National Textile Act provides for penalties in case of noncompliance. It will be absolutely essential to make an example of a few cases in order to achieve broad compliance with the law. The average manufacturer has very little respect for a law which is not enforced and which has no teeth. Once he finds that the law will be applied uniformly and energetically to all concerned, then it will be possible to have effective regulation with a minimum of supervision.

We wish to call the attention of this committee to certain other features of this legislation which will be of widespread social benefit and which will fulfill the purpose of the law, which is to rehabilitate conditions in the textile industry. One of the most praiseworthy and intelligent undertakings of the New Deal has been the establishment of the Tennessee Valley Authority.

The American Federation of Hosiery Workers and its affiliates enthusiastically and earnestly support the purposes and policies of the T. V. A. We must point out, however, that if natural resources are to be conserved and developed in a given area that industry will spread into that region. Under present conditions the migration of

industry from one part of the country to another for the purpose of securing lower wages, lower taxes, and fewer controls is definitely harmful. We contend that the establishment of the textile industry in the South, or in other agricultural areas, has brought no substantial social benefits to the people of the South but has done much to destroy the characteristic agricultural economy of the region. Organized labor contends that unless national legislation is enacted which will establish and enforce nationally uniform conditions of employment, that the whole purpose of that splendidly conceived plan for regional development in the Tennessee Valley will be utterly defeated. Under our present system the benefits of cheap power will not be gained by the workers in the Tennessee Valley but by another group of profiteers closely allied to those same private utilities whose monopolistic grip on our economy we are now trying to loosen.

It would be utterly ridiculous if the Government should find that it has aided the exploitation of human beings by its efforts to end the wastage of our physical resources. Therefore it becomes necessary to create nationally uniform regulation that will make it mandatory for employers who gain the benefits of low-cost power in one section of the country to pay the standard rates of wages to their help. As a matter of fact the Southern States cannot take advantage of the benefits of the T. V. A. development unless wage payments in the South are increased in the basic industries. Cheap power will mean nothing to seamless hosiery workers who are forced back to wages of $3 and $4 a week. Employees who earn so little will not become consumers of electricity-even though electric light may be cheaper than candles or kerosene lamps to operate. The most generous government will not wire the houses of workers whose income is so low that they cannot afford the basic necessities of life.

The American Federation of Hosiery Workers is vitally concerned with the problem of the South. Unless southern workers can be aided in their fight to win the right to organize and improve their standards of life, standards of our northern workers will be reduced to the disadvantage of both the northern and southern sections of our industry. When wages go down in the North, wages in the South go still lower. The only sane policy, therefore, is to pay the same basic wages for the same work no matter where the factory is located. In an industry such as textiles labor costs are not determined merely by actual piece rates or by hourly or weekly earnings. Labor costs are also determined by the efficiency of the plant and by the skill of the operatives. When minimum wages are the same all over the country we eliminate unfair competition and allow so-called legitimate competition to function. Legitimate competition on the basis of efficiency and skill can only come into play when wage cutting and speed-up as a means of securing business have been curbed.

There is no sound reason why a worker in the South should receive a penny less for knitting a pair of stockings than a northerner does if he is equally as skilled and equally as reliable a worker. Economic competition between geographical areas in this country is the most dangerous condition which we as a Nation face today. Under the guise of local patriotism exploitation of the worst kind is being carried out. Actually the interests of the southern worker are identical with that of the northern worker and not with the mill manager in his own State who is, no doubt, controlled by northern capital. Political progress is prevented and racial antagonism perpetuated in this country because

of the refusal of employing groups to eliminate sectional wage differentials. We in America will never become a really united Nation until we recognize that there is no justice in paying a man or woman less and working longer hours merely because they happen to live in a State with another name.

To illustrate the dangers of differentials in wage rates between one section of the country and another let me cite the situation in the fullfashioned section of the hosiery industry. Today more than 80 percent of the total production of full-fashioned hosiery_is produced in unionized mills or in mills paying the union rates. It has been the tactic of the nonunion employer in the full-fashioned industry to pay union rates and enforce union conditions in order to make it difficult for the union to organize the employees in these plants.

There are some few mills in isolated sections in the North which pay below the prevailing rate in the industry which is the union scale. But in the South, where about 15 or 16 percent of the full-fashioned product is manufactured, the labor costs are considerably less than the costs in northern mills. Labor costs on a typical style in a northern mill paying prevailing rates to labor amount to about $2.10 per dozen. In the average full-fashioned mill in North Carolina, Tennessee, or Georgia, the labor costs on this same style will range from $1.50 to $1.65 per dozen. This means that the southern manufacturer has an advantage of from 50 to 65 cents per dozen. The importance of this differential will be recognized when it is known that the average selling price per dozen is from $5.50 to $6 per dozen. An advantage of 50 cents or more per dozen enables any manufacturer under present conditions to undersell his competitor and create a dangerously unstable condition in the hosiery market. It is true that only 15 to 16 percent of all full-fashioned hosiery is made in the South where labor costs are so much lower than in the industry as a whole. Nevertheless, the volume of production now made in the South is sufficient to endanger the stability of the entire industry.

As long as one area in the industry operates on the basis of distinctly lower wage rates the tendency of the whole industry will be to bring its labor costs down to those paid by the manufacturer whose rates are the lowest. There is a constant temptation on the part of the northern manufacturer to move South, and a constant friction exists between the employing group which pays lower rates than those paid in the industry as a whole. The market is constantly disturbed by the underselling of the mills which pay a substandard labor rate, and the whole outlook in our trade is unstable and uncertain. It has become quite clear that unless something is done to raise southern wage rates that we shall be faced with a very serious period of strikes and conflict and disturbance in the full-fashioned industry.

In concluding this statement, I wish to state that the experience of the employees and the employers also under the hosiery code was definitely beneficial. An examination should be made by your committer into the records of the hosiery code and the hosiery industry under the Hosiery Code.

For instance, the Hosiery Code Authority estimated in July 1934 that wage payments during the first 6 months, operation of the code increased from $792 per 1,000 dozen pairs prior to N. R. A. to $1,092 per 1,000 dozen pairs. The workers gained first by the shorter workweek and also by increases in wage payments of 37.9 percent, as the

above figures show. The code wage rates and hour regulations are still standard in our industry, and we had a record-breaking year in our business last year for shipments and production. The point I am making is that hours, regulations, and uniform wage rates tend to increase sales and to enable manufacturers to earn modest profits.

There is, therefore, statistical proof available of our contention that the regulations contained in the Ellenbogen bill will be beneficial to our industry. The 35-hour-workweek regulation is somewhat shorter than the 40 hours that our code provides. Investigation will prove that the Hosiery Code did, in July 1934, of its own motion seek to have the code amended to provide a 35-hour workweek. Previously a period of curtailed production had been enforced because the output of the industry had jumped so alarmingly that it was necessary to hold down production for a time.

What took place in the textile industry and hosiery industry was that double-shift operation increased so widely when hours were reduced that total production was stepped up. The benefits of this situation however are obvious. The principal purpose of shortening hours is to create more jobs and to aid economic recovery. It is not always possible, of course, to know just how far hours should be reduced. Forty hours is clearly too long a workweek in hosiery. But it is also very clear that when hours are cut more people are put to work. A great many additional persons were added to the pay rolls in the hosiery industry as a result of the reduction in hours. Before the codes were installed the number of workers on the pay roll was about 90,000. Last year the number on the pay rolls was over 140,000. To summarize, therefore, let me say that the 35-hour workweek will in our opinion provide steady operation in the industry and enable the employer, the employee, and the public to benefit from improved conditions in the industry. Government regulation in the past has increased employment, wage payments, production, and profits in the hosiery industry. There is ample proof available from impartial sources that this situation will hold true as a result of the application of the National Textile Act. We strongly urge that this bill be enacted into law as rapidly as possible.

Mr. KELLER. Mr. Wood, have you any questions?

Mr. WOOD. No, Mr. Chairman; I have not. But I will say that it was a mighty fine statement and the best that I have heard since we opened the hearings.

Mr. HARTLEY. Did the voluntary codes which were proposed by the industry after the abolition of N. R. A. include only agreements on hours and wages?

Mr. RIEVE. It included hours and wages and certain fundamental fair-trade practices.

Mr. HARTLEY. Did it also include price fixing?

Mr. RIEVE. The original hosiery code did not contain provisions for price fixing and, therefore, the voluntary code did not.

Mr. HARTLEY. What reasons do you ascribe for the failure of the voluntary code?

Mr. RIEVE. Because of the natural human element. No competitors can agree to regulate each other. Economic forces are at work, and when one of them feels that he can get a big order provided he sells at a little cheaper price, he starts to chisel, and then the next fellow sees that and says that if Tom Jones can get away with it then he can.

So you have a constant chain which works in that operation.

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