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U. S. DEPARTMENT OF LABOR BUREAU OF LABOR STATISTICS WASHINGTON Fobrmary 18 f 1943 *•• Tbo Soorotary Frasi A. F. llarloaa Subjooti 81gaifl#aaoo of tho 41 l o w Staadard Vorfcvook for tbo Probloa W pricks !• Tho B&ooutiyo Ordar ootabllahlng a iS-hour oohodulo aa tho standard vorfcwoak in tbo Oaitod ttatoo vas limitod In it* applloation, by authority of tbo Var Hanpovor Coaoiasioa, to only a fall oofaoat of laduotry. lot only vaa lt# applioation roftrlotod to 32 dosigaatod labor •arkat aroa«9 bat prcviaioa vaa aado for oxoa^tloA - foaorally oa aa oaUbllateoat baaia - nhororor tbo Var Maapowar Coawiaaloa dooaod lto applloatioa laoxpodioat or aaaoooaaarj. 2. Tbo potential laflatloaary offoot of tho orortlao proalwa upon vago pajaovto If, tharoforo, rathor aofllflblo booauoo of tbo roitarlotod goograahio application of tho Ixooativo Ordor aad laomati1/ or ••tablifivM i t ojoaaptloa vithia tight labor aarkat aroaa| booauoo tho ovortiao proritioM of tbo Fair Labor Btaadarda Aot do not oovar broad aroaa of canloyaontl aad booauoo a largo part of indautry (aaanfaotarlagt particularly) van already woriciag boyond 40-hour• aad paying ovortiao. 3. Vookly bouro aotaally workod in tbo dtirablo aamfaoturlag iadaatrios aTaragod 46.2 la Doooabor 19i2. Tho oohodulod vorkwook in thooo ladaatrioa, thoroforo9 ganorally aToragod 4B hour* or aoro • aotaal bo«rt roportod aoooaoarily a^orago losa thaa aohodulad hoar a booamoo of hlroo9 aaparationa> and abooat«oiaa« Ivan in tho aoadurablo goodo ladajtriot, vhioh araragod A291 hour9 of aotual vork la Dooombort aaay ootabllahBoata varo oporatiag oa U> and 46-hour oobodulot. A* Hov aaall tho potoatial laoroaoo la pay roll* la manufacturing would bo la lndloatod by aa aatimto of tho Baroau of Labor 8taU»tioa, vhioh ahova that if tho Sxooutiva Ordor vaa oaforood in all aroaa of tho oouatry, vithoat any oxovptlona, factory pay rolls vould riao by loaa thaa 3 poroont9 or looa than |75O alllion on an annual baaia. (Boo attachod tablo). 5* Tboroforop vhilo it la t m o that an lodiTidual foraorly working iO houra vould rooolvo a pay lnoroaao of 30 porooat if ho vorkod 48 hours aad roealvod tlmo aad a half orortlao, tho flguro of 30 pareant la not aignifleant olthor froa tho ooat point of riov of tho producer or froa tha point of T I O V of tho problom of inflation. w No. <L - MentoreniiiTi to the Secretary February 18, 1943 6. Th*»re is not »v*n a prlmn racle case for the argument that the payment of overtime vill nace? anrily require an adjustment of orice ceilings nov in effect. At r.oet, va^e >aynent* for n manufacturer would be increased by 8 1/3 jere*nt - on tha asBumption that previously he vat operating 40 hours nnd paying no overtime and, un<4«r the Ixecutiv* Order, vould nov pay tine-anri-one-half on 8 additional hours. The effect of the overtime wage premium vould be considerably smaller percentagewise because of the faot that labor costs are only a fraction of total costs of production. Detailed studies of individual industries and firms vould ba necessary to prove that commodity price ceilings vould need to be increased in any particular case. 7. The mere fact that many plants preferred to remain on a 40-hour schedule is not conclusive proof that the overtima provision of tha Fair Labor Standards Aot vas prohibitive from the point of view of production costs. Many other factors accounted for the decision of firms to remain on a ^0-hour schedule. In an increasingly tight labor narket, aany firms vanted to retain a labor reserve to cover future losses to the armed services or to othor industries. Many firms were not under pressure to extend hours because, even though they vere losing workers to industries offering higher v*»€iciy earnings, their volume of output vas declining. In many instances, workers vere willing to remain in such establishments because, especially in the case of women, considerations of health and household responsibilities made overtime work undesirable. Further, In many establishments, the operating process was adjusted to a 40-hour schedule and it was convenient to continue on that basis as long as possible. (The continuous-process Industries are special examples) more typical oases are to be found in the nondurable manufacturing group). 8. The aaount of overtime premium to be paid because of th« iapaot of the Executive Order is so negligible that it is a minor consideration in the general problem of Inflation. It vas the curtailment of consumer goods (in a situation of mounting wage payments) vhleh gave rise tc th« inflationary gap, nov estimated at between fifteen and twenty billion dollars. Further curtailment of consumer goods vill intensify the inflationary danger more than the increased wage payments attributable to the Executive Order. Hence the argument that the Order is inflationary because individual workers will receive 30 percent additional vage payments for producing (approximately) 20 percent more output is not particularly relevant because it is Mffrmy unlikely that the volume of consumer goods vill be maintained. The inflationary effeot of the Order could be immobilised by payment of the overtime in the form of war bonds. But the general problem of inflation is little changed by the Ordar. Taxation, rationing, compulsory savings, cost subsidies and other devices are the measura* of control by which tha genaral problem of inflation Is (and should ba) approached.
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