Fair Labor Standards Speech by Senator John F. Kennedy, Delivered in the Senate

Today we begin debate upon the minimum wage bill known as the Fair Labor Standards Amendments of 1960.

The bill has two major purposes. First, it will raise the minimum wage now received by 2 1/2 million workers from $1.10 to $1.25 an hour. Second, it will extend the protection of the Fair Labor Standards Act to 5 million additional employees, chiefly in large-scale interstate retail and service industries, thereby guaranteeing these employees a fair minimum wage and a just premium for overtime.

Conscience and good business sense join in demanding the enactment of this measure. The bill will extend to the lowest paid workers - to 3 1/2 million men and women and their families - a fairer opportunity to shave our high standard of living. To pass them by - to water down the help they need - or merely assume that prosperity at the top will someday reach them - shocks the conscience of those who care.

The increases in purchasing power resulting from a higher minimum wage will help to restore consumer demand required to put our idle industrial capacity back to work. The elimination of unfair competition based upon substandard wages will protect fairminded employers anxious to maintain fair labor standards.

The pending bill is the result of long and careful study. The Labor Subcommittee of the Committee on Labor and Public Welfare held hearings on 10 days, in which it beard 77 witnesses. The relevant bills were reviewed in executive sessions in the course of which all members of the subcommittee made helpful contributions. The committee bill embodies a wide consensus of opinion among Senators from both sides of the aisle. The minority report is signed by only three Senators.

The full extent of the changes to be made in the present law is summarized in a memorandum which I ask unanimous consent to have printed after my remarks in the Record. At this point I desire to speak only of the principal provisions.

MINIMUM WAGE

The bill raises the minimum wage applicable to employees now covered by the Fair Labor Standards Act in three stages: To $1.15 an hour, effective January 1, 1961, to $1.20 an hour on January 1, 1962, and, on January 1, 1963, to $1.25 an hour.

In one sense, this is not new legislation. The Fair Labor Standards Act was enacted in 1938 in order-

to protect this Nation from the evils and dangers resulting from wages too low to buy the bare necessities of life and from long hours of work injurious to health.

When the original 40-cent minimum became inadequate Congress raised it to 75 cents and later to $1 an hour. Now economic progress again requires a higher wage if we are to carry out the central purpose. An increase from $1 to $1.25 an hour is necessary to put those wage earners who earn the minimum in the same position, relative to other segments of the economy, that they occupied after the 1955 amendment. Thus the present bill merely extends to lower paid workers the gains already achieved by more fortunate groups through increased productivity and collective bargaining.

Just a few figures make the point clear. In 1955, when the present $1 minimum was established, the average hourly earnings of employees in manufacturing industries were $1.88. By March 1960, average hourly earnings had increased 41 cents, or 22 percent. To maintain the same cents per hour differential, the statutory minimum would have to be raised to $1.41. To maintain even the same relative position, it would have to go immediately to $1.22 an hour instead of the $1.15 recommended by the committee. A small part of the change in average hourly earnings is probably the result of shifts into higher paid types of employment; but the comparison demonstrates beyond doubt that failure to enact the increases recommended by the committee would remit 2 1/2 million wage earners to a declining status.

The need for action is the more acute because of the sharp increase in the number of employees dependent for a fair wage upon congressional action. In 1955 roughly half a million workers covered by the act were receiving either the statutory minimum wage or an hourly rate no more than 5 cents higher. The latest figures available show that 1 1/3 million workers covered by the act are receiving either the statutory minimum or a rate no more than 5 cents higher. This is 2 1/2 times the earlier figure.

Consider the meaning of this trend to the workers affected. Since 1955, there has been a 15-percent rise in productivity. They shared none of this gain. There has also been a 10-percent rise in the cost of living. The workers dependent upon the minimum wage have therefore suffered a 10-percent decline in real earnings - in their ability to provide food, clothes, homes, and health for their families.

Let me be still more precise. There are 35,000 workers in the apparel industry in New York City alone who depend upon the Fair Labor Standards Act for a fair minimum wage. The New York City Department of Welfare regards $74 a week as the minimum budget for health and safety for a family of four - a man and wife and two children. Working the standard 40 hours, a man would earn only $40 a week at the preset minimum - $34 short of the pay-check needed. Even the proposed minimum of $1.25 would leave his earnings $24 short of the sum required to support his family. In some families more than one person is employed; but even if the man and wife both worked full time every week, the present statutory minimum would hardly cover the budget; expenses rise when both adults are working.

The proposed increases will not injure business firms. They are not inflationary. They will not cause significant unemployment. If the dangers fancied by the minority were real I would join them in opposing the measure. The welfare of the business community is essential to a prosperous economy. To drive firms out of business or to force them to curtail operations would defeat our very purpose. But the same arguments were presented against minimum wage legislation in 1938, 1949, and 1955. History disproved them. On each of these three occasions increases for sharper than those we propose today were put into effect without injury to employees, inflation, or unemployment. The fancied dangers were never realized.

The experience after the 1955 amendments is the most instructive because their impact is traced in a careful study prepared by the U.S. Department of Labor. The Department found that the increase from 75 cents to $1 an hour did not substantially affect any of the standard statistical series measuring trends in hours of work, employment, or consumer prices. The impact was too small to be discernible in relation to overall economic activity.

More detailed study of 15 low-wage industries showed that employment rose in some industries after the $1 minimum was put into effect and declined in others. Evidently the change in the minimum wage was not a determinative factor. In order to obtain a still broader view, the study was extended in six communities so as to include both covered and noncovered industries. During the 2 months following the statutory increase employment in the covered industries rose in one, fell in two, and was virtually unchanged in the others. These changes in employment can hardly be attributed to the statutory increase but it is interesting to note that 3 years after the statutory increase employment in the same communities had risen 20 percent in the industries subject to the act and only 14 percent in those outside the statute.

In short, the Labor Department's study fully supports the conclusion that the 1955 minimum wage increase did not result in any substantial changes for the Nation in either price levels or employment.

The increases now proposed can have no greater impact. In 1955 the increase was 25 cents an hour, or an average of 15 cents for each employee directly affected. In 1960 the increase will be only 15 cents, or an average of 9 cents for each employee directly affected. Put another way, the 1955 increase raised the statutory minimum 33 1/3 percent, whereas the 1960 increase will be only 15 percent. The increase in the total wage bill will also be markedly smaller. Since the 1955 increase was readily absorbed by the economy, we are bound to conclude that it can now absorb the smaller 1960 increase. The 5-cents-an-hour increases in 1960 and 1961 are no larger than might be expected in collective bargaining.

The exaggerated fear of adversely affecting costs, prices and employment apparently results from the fallacious assumption that an increase in the Statutory minimum requires corresponding wage increases all up and down the line. Secretary Mitchell disposed of this argument in his testimony before the House Labor Committee.

* * * as to the allegation that there is an upward, forward movement immediately corresponding to the wage increase, that experience has shown that this does not happen.

Any increase in the minimum would undoubtedly require some adjustment of the wages of other employees of the same business even though they earn more than the statutory minimum, but the increases would taper off rather quickly. As I pointed out earlier, since 1955 average hourly earnings have increased much faster than the statutory minimum. Generally speaking, wages at the bottom of the scale can be brought up to their old relationship without unduly narrowing differentials.

It would be naive to deny that there will be no dislocations. In a few instances there may be an undesirable compression of the wage structure. But, fairly read, both history and the available studies show that the increases can be absorbed without damage to business, inflationary price increases, or unemployment.

NEW COVERAGE

The committee bill would extend to 5 million additional wage earners the guarantees of a fair minimum wage and a reasonable premium for overtime employment.

The major expansion of coverage brings under the act retail and service establishments whose annual gross sales exceed $1 million. Establishments grossing less than $1 million a year will not be affected. They will also continue to benefit from the present section 13(a) (2) exemption. I emphasize the point because there has been widespread misunderstanding. The bill does not touch ordinary inns, hotels, restaurants, or motels in any part of the country. For example, a motel owner who charged $15 a unit and maintained 180 units which he rented every night of the year would be too small for the bill to affect him.

Likewise, the bill does not apply to the independent grocer or druggist, the country store, or even the independent department stores and supermarkets found in most American cities. Ninety-seven percent of all retail enterprises would not be affected.

We are concerned only with the large metropolitan department stores and vast chains which now dominate the retail industry. Their outlets spread through many States. The management is centralized. Prices are often uniform. Goods are purchased in large quantities from all over the Nation often at prices which cannot be obtained by independent merchants. Their operations depend upon the channels of interstate commerce. And where hotels and other service establishments are large enough to gross a million dollars their conditions of employment also become matters of national import.

It is grossly inaccurate to describe these million dollar enterprises as local businesses which ought not to be regulated by the Federal Government. In 1938 the point was doubtful, but the constitutional power of Congress has now been established. Many Federal statutes already apply to such large retail enterprises - the pure food and drug laws the Wool Products Labeling Act, the Sherman Act, the Federal Trade Commission Act and the National Labor Relations Act. The NLRB conducts elections among the employees whom this bill would bring under the Fair Labor Standards Act. Their employers obtain Federal assistance against boycotts and picketing. Last year their trade associations were outspoken lobbyists for additional Federal restrictions upon the rights to strike and picket. At the present session some of them are actively sponsoring Federal legislation for resale price maintenance. Bringing under the Fair Labor Standards Act the employees of retail and service establishments grossing $1 million in annual sales conforms the law to otherwise uniform pattern of social legislation. There is no merit to the argument that the bill changes the balance between State and Federal authority.

The extension of coverage to retail and service establishments which gross $1 million annually will not even indirectly affect smaller businesses. Experience shows that a high wage employer can move into a community with relatively little effect upon the wage scale of smaller local industries unless there is a shortage of qualified labor. Similarly, the wage scales of large metropolitan department stores and multiunit chains will exert no great influence upon smaller businesses.

The other major change in coverage will correct a historic accident. In 1937 and 1938, there was grave uncertainty concerning the constitutional power of the Congress to enact a minimum wage law. Various constitutional theories were suggested. The Senate bill followed one course; the House took another. The conference report based coverage on the work of the individual employee. Under the present law, therefore, a worker is covered only if he himself is engaged in commerce or in the production of goods for commerce. The nature of the employer's business is irrelevant. Thus, there may be two employees, working side by side in the employ of the same employer, one of whom is protected by the statutory minimum wage and one who is not. For example, a wholesaler's order clerk who typed orders for goods purchased out of State would be entitled to the statutory minimum, but the billing clerk at the next desk who typed bills for customers inside the State would lack the same protection. The distinction is arbitrary and capricious.

So far as I am aware, the Fair Labor Standards Act is the only statute under which coverage depends upon the work of the individual employee. The supposed constitutional justification no longer exists. Accordingly, the committee bill puts coverage upon an establishment basis, as under other labor legislation.

The change will greatly simplify enforcement of the statute. Employers and the officials of the Wage and Hour Division will be able to determine the status of all employees in an establishment without checking the individual work of every employee. The inequity between employees in the same establishment will be abolished.

The justification for applying the proposed new minimum wage to the newly covered employees is the same as the reasoning which supports the increase in the minimum. The employees have the same needs. Their wages have fallen behind average hourly earnings to the same, and possibly a greater, extent than the wages of employees earning the statutory minimum. They are equally entitled to share in economic progress.

The fiscal burden of an inadequate minimum wage law lies upon the community, and thus upon every taxpayer. In New York City, 44 percent of the families to whom relief is extended include those who are wage earners but whose incomes are inadequate. An economic burden also lies upon competitors whose ability to pay a just wage is frustrated by unfair, low-wage competition. But the burden which should concern us most lies upon the American conscience. We can no longer tolerate growing patches of poverty and injustice in America - substandard wages, unemployment, city slums, inadequate medical care, inferior education and the sad plight of migratory workers. The enactment of this bill is only one step, but an essential step forward, as we cross this frontier to grasp the high opportunities which face the Nation.