13713 WORKS PROGRESS ADMINISTRATION WALK fTR JOHN HON 0UILOING 1734 NEW YORK AVENUE NW. WASHINGTON, D. C HARRY L. HOPKINS ADMINISTRATOR * tj - « 4" +" X ■ 1 1 jr / ' ' J "ToSS,"" S s^75,'. So/ f3<~) L3, MEMORANDUM CO / T November 4, To: Mr. Elmer F. Andrews, Administrator Wage and Hour Division U. S. Department of Labor From: Mr. Corrington Gill, Assistant Administrator Works Progress Administration The attached memorandum on industrial lay-offs alleged to "be due to the Wage-Hour Law, summarizes the reports from all our State Administrators and preliminary returns from field check-ups. Many of the earlier news reports considerably exaggerated the difficulties exper¬ ienced because of the new Act. The number affected by plant lay-offs is apparently not more than 30,000 to 50,000, or less than one half of one percent of the workers coming under the Act. These workers, many of them of restricted employability, are highly concentrated in four or five South¬ ern industries, and are being replaced in part by more ef¬ ficient workers able to earn the 25 cent minimum. A number of field reports suggest that when all readjustments are completed, total employment will have been increased rather than decreased as a result of the operation of the Act. Many of the lay-offs reported are not due primarily to the new Act. Among the more important contributing factors are seasonal changes in activity, substitution of efficient ) for inefficient workers, and curtailment as an offset to i abnormally increased activity prior to the effective date of v the Act. i3713 November 4, 1338 MEMORANDUM Lay-offs Reported Due to Wage-Hour Law Field reports on plant lay-offs attributed to the operation of the Fair Labor Standards Act indicate that the total number of workers affected in the United States is not more than 30,000 to 50,000. This number represents less than one-half of one percent of the total number of workers coming under the provisions of the Act, and about one-tenth of one percent of all gainful workers. The significance of the lay-offs is still further reduced by the fact that a large share of the total consists of marginal and handicapped workers, whose position in the economic system has long been insecure. Many of the workers out of jobs are women in the higher age ranges, Negroes, Mexicans and slow and inefficient workers whose employability is limited. Some of the inefficient workers laid off are already being replaced by more efficient workers able to earn the minimum hourly rate; this transfer process will operate to reduce further the net effect of the Act on employment volume. It is noteworthy that the lay-offs have been concentrated in a very few industries in the South, most of which are characterized by wretchedly low wage rates and other special conditions, or make use of a particularly ineffi¬ cient part of the labor supply. A.bout 90 percent of all the workers reported laid off were employed in one of the following industries: pecan shelling, tobacco stemming, lumber, and bagging. A considerable number of persons em¬ ployed in the home production of garments and candlewick bed spreads have also been affected by the Act, but most of these workers appear to be secondary wage earners supplementing other family income. Two industries, pecan shelling and home production of bed spreads, have long been notorious for extremely low wages. Firms paying five cents an hour for home work or $2.00 to $2.50 for a full working week will receive little sympathy because of forced curtailment. In regiops other than the South, acceptance of the Act appears to be virtually complete. Some increases in employment as a result of the shortening of hours have been noted. In 32 States, the WPA Administrators report that no instances of lay-offs have been found and in each of five additional States there is evidence of only one situation involving a lay-off. States reporting no lay-offs: Arizona California Colorado Connecticut Delaware Idaho Indiana Iowa Kanaas Kentucky Maryland Massachusetts Minnesota Montana Nebraska Nevada New Jersey New Mexico New York North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Dakota Utah Vermont Washington West Virginia Wisconsin Wyoming 13713 - 2 - States reporting only one situation Involving lay-offs: District of Columbia Mississippi Maine New Hampshire Michigan Field reports indicate that in many cases where lay-offs have actually occurred factors other than the requirements of the Fair Labor Standards Act have been primarily responsible. Such factors are: 1. Normal ending of seasonal activity 2. Chronic unstable condition of plants concerned 3. Substitution of efficient workers for inefficient employees 4. Reductions as an offset to abnormally increased activity prior to October 24, to avoid payment of minimum rates 5. Uncertainty as to application of Act Except for the Act, some of the shut-downs would not have occurred at this time# but the nature of the industries and the marginal character of many of the firms involved suggests that they are generally subject to such shut-downs as the result of slight changes in costs or prices. 1. Lay-offs of tobacco stemmers in Georgia, Southern Virginia and some areas of North Carolina are definitely attributable to seasonal factors. The tobacco crop is already in storage in much of the growing area and the work of stemming is tapering off in the central area of North Carolina and in Virginia. Hence, where tobacco stemming is done by casual workers, as is the case for the independent small firms of leaf dealers, employment is normally curtailed when the year's tobacco crop has been handled. There have been no lay-off reports for the large factories manufacturing tobacco where stemming is done the year around largely by machinery. (A separate report is being made upon technological factors related to lay-offs reported due to the Wage-HourAct.) 2. Most of the lumber mill workers reported to be laid off (between 7,000 and 8,000) are in Georgia and Alabama. Because of the considerable number of small mills in these States, generalizations are difficult, but evidently some of the lay-offs have occurred in the marginal firms which, because of fear and uncertainty about the Act, are suspending operations to await price increases. Saw mill operators, especially in the smaller plants where less extensive mechanization makes labor costs especially important, are apparently reluctant to go ahead until the nature of the necessary adjustments under the law is known, or until desired exemptions are secured. Reports from Arkansas, Alabama, South Carolina and Virginia indicate that the larger lumber companies have generally not been affected and that it is expected that many of the plants already shut down will reopen in the next few months. 3. Lay-offs have been used as a method of eliminating slow or inefficient workers in favor of more skilled types in some tobacco plants in North Carolina, in certain pecan and candy factories in Georgia and in various industries in Louisiana. By this device, white women at the higher rate have replaced Negro women and marginal workers have been laid off to m^.kp. a place for efficient workers able to earn the 25 cent hourly minimum. In some instances 13713 - 3 - e.g., among North Carolina tobacco stemmers, the "better workers who were laid off have "been quickly rehired. It is probable that more of the workers laid off will soon be taken back since shortages of efficient workers have already been encountered. 4. Speed-up of production prior to the application of the Act has in some cases been a major factor in the present lay-offs. In Florida and Alabama for example some lumber plants have completed work which ordinarily would not have been finished until the first of next year. Pecan shelling factories in Chicago had built up inventories considerably above normal by increasing the hours worked beyond the State legal limit. The abnormally large inventories made it possible to lay off approximately 2,000 or more than 90 percent of the total number of workers in the industry in Chicago, just before the Federal Act became effective. 5. A number of small plants in industries producing such widely differing goods as bricks, silk, baskets, and buttons have shut down temporarily until their status under the Act has been clarified. Some of these cases represent plants which have been curtailing production over a long period of time and have laid off their remaining workers announcing that the shutdo^vn was caused by the requirements of the Wage and Hour Act. Others may be expected to reopen when their status under the Act becomes clear. Widespread shut-downs in the pecan industry, especially in Texas, have occurred while exemptions from the wage provisions are being discussed. Because of the notoriously low wages paid pecan shellers, many of whom regard pecan shelling as a means of supplementing their income from seasonal agricultural work, serious readjustments will have to be made if the Act is to be observed. Both employers and leaders of the employees contend that the minimum wage rate cannot be paid immediately. Meanwhile, it is estimated that 10,000 to 12,000 Texas pecan workers are unemployed. Two other types of employees whose status is being defined are red caps and telegraph messengers. The exact number affected by lay-offs or furloughs is not known but apparently does not exceed two or three thousand. November 4, 1938 SUMMARY OF REPORTS OF I INDUSTRIAL LAY-071'S AND SHUT-DOWNS ALLEGED TO BE DUN" TO WAGE-HOUR. LAW Industry Pecan Shelling Tobacco Plants Lumber Mills Clothing Place San Antonio, Fort Worth, and 6 other Texas communities, (Dallas, Houston, Waco, Seguin, Tyler, El Paso) Mobile, Alabama Dawson Co., Georgia Pascagoula, Ala., and St. Louis Monticello, Florida Chicago, Illinois Georgia North Carolina (concentra- trated largely in Greenville, Rocky Mount, Winston-Salem, Wilson, Henderson and Goldsboro) Tampa, Florida Danville, Virginia Qpincy and Germantown, Fla. Newbern, N. C. Georgia (scattered areas) Alabama (scattered areas) Linden, Texas Arkansas Hattiesburg, Miss. Florida (scattered areas) Richmond, Virginia Buena Vista, Virginia South Carolina Louisiana (scattered areas) San Antonio, Texas Newport, N. H. New Orleans, La. Bibb County Georgia Number of Workers Reported ( ( ( 11,000 ( 32 60 Number unreported, but believed small 275 2,000 1,000 (installed new machines) 5,500 - 6,500 300 (lay off of slow and inefficient workers) 800 - 1,000 130; installed stemming machines 250 3,000 - 3,500; 200 expected to return to work shortly 1,863 100 375 300 650 2 small saw-mills closed tenporarily Approximately 20 Approximately 400; more expected shortly Several small mills 3,000 - 6,000 home workers expected to be unemployed; dependent upon adjustment worked out under law. 25 inexperienced workers laid, off 23 from tailoring company 12 from shirt factory 13216 - 2 - Industry Bagging Red Caps Telegraph Companies Miscellaneous Place New Orleans, Louisiana Charleston, South Carolina South Carolina Norfolk, Virginia Tuscumbia, Alabama Huntsville, Alabama Clayton County, Georgia Scattered urban centers Nationwide Alabama Newport, Arkansas Georgia Portland, Maine Detroit, Michigan Charleston, S. C. Fort Worth and San Antonio, Texas Marshall, Texas Clark County, Virginia Berryville, Virginia La Grange, Georgia Bibb County, Georgia South Carolina Number of Vforkers Reported 424 400 123 from used bag industry allegedly due to wages (probably seasonal) 120 43 35 30 Exact number unobtainable, but definite reports of lay-offs in Dallas, St. Louis (53), Washington, D. C. (75 reported furloughed because of lack of business), and Chicago (55). Exact number unobtainable; estimated to be 1,000 - 1,500 50 - 75 from miscellaneous industries (pecan, oil & fertilizer, silk) 50 workers in cotton oil mill and small number of button cutters 10,000 - 11,000 piece workers of hand-made candlewick spreads (home industry); 500 - 700 factory workers 141 carrier boys from publishing company because of age limit 40 calendar company workers 45 from junk company Few workers from 2 peanut plant s 65 from brick company; 100 from basket manufacturing company Milling company closed; number laid off small. Few workers from basket company; apprentices from silk mill 37 from oil mill 14 from telephone pole dealer 100 - 150 from textile industry