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Unemployment in the United States


S. Res. 219



DECEMBER 11, 12, 13, 14, 17, 18, AND 19, 192.8, JANUARY 9 AND 14,
FEBRUARY 7, 8, AND 9, 1929

Printed for the use of the Committee on Education and Labor

W A S H I N G T O N : 1929

JAMES COUZENS, Michigan, Chairman
JESSE H. METCALP, Rhode Island.
HIRAM BINGHAM, Connecticut.
FREDERICK H. GILLETT, Massachusetts.

DAVID I. WALSH, Massachusetts.




2d Session



( No. 2072


FEBRUARY 25 (calendar day, MARCH 1), 1929.—Ordered to be printed

Mr. COUZENS, from the Committee on Education and Labor, submitted the following
[Pursuant to S. Res. 219]

Under date of May 3, 1928, the Senate adopted Senate Kesolution
219 of the Seventieth Congress, first session. The resolution was as
Whereas many investigations of unemployment have been made during recent
years by public and private agencies; and
Whereas many systems for the prevention and relief of unemployment have
been established in foreign countries, and a few in this country; and
Whereas information regarding the results of these systems of unemployment,
prevention, and relief is now available; and
Whereas it is desirable that these investigations and systems be analyzed and
appraised and made available to the Congress: Therefore be it
Resolved, That the Committee on Education and Labor of the Senate, or a
duly authorized subcommittee thereof, is authorized and directed to make an
investigation concerning the causes of unemployment and the relation to its
relief of (a) the continuous collection and interpretation of adequate statistics of
employment and unemployment; (b) the organization and extension of systems
of public employment agencies, Federal and State; (c) the establishment of
systems of unemployment insurance or other unemployment reserve funds,
Federal and State, or private; (d) curtailed production, consolidation, and ecomonic reconstruction; (e) the planning of public works with regard to stabilization of employment; and (f) the feasibility of cooperation between Federal,
State, and private agencies with reference to (a), (b), (c), and (e). For the puroses of this resolution such committee or subcommittee is authorized to hold
earings and to sit and act at such times and places; to employ such experts
and clerical, stenographic, and other assistants; to require, by subpoena or otherwise, the attendance of such witnesses and the production of such books, papers,
and documents; to administer such oaths and to take such testimony and make
such expenditures as it deems advisable. The cost of stenographic services to
report such hearings shall not be in excess of 25 cents per hundred words. The
expenses of such committee, which shall not be in excess of $15,000, shall be paid
from the contingent fund of the Senate upon vouchers approved by the chairman.
The committee or subcommittee shall make a final report to the Senate as to it«
findings, together with such recommendations for legislation as it deems advisablef
on or before February 15, 1929.





Shortly after the Senate had adopted the resolution your committee
met to consider plans for making the survey. The assistance of the
Institute of Economics of the Brookings Institution of Washington,
a nonpartisan, private organization, was sought, and the institute
assigned Dr. Isador Lubin, of its staff of economists, to assist in
directing the work. The work of the institute has been voluntary,
and, as a result, the expense of the survey to the Government has been
The committee and the Senate owe the Institute of Economics a
debt of gratitude, and the committee herewith expresses it and also
compliments the institute upon the work it has done.
The report of Doctor Lubin, which summarizes the evidence submitted to the committee and comments upon it, is printed at the
conclusion of the printed hearings. Anyone who has followed this
work or is interested in this subject should read this report.
The committee is likewise indebted to the Industrial Relations
Counsellors of New York, another endowed organization which has
been interested in the subject of unemployment. This organization
contributed to the committee three volumes of a report it has made
on the subject of unemployment-insurance plans. Although this
report touches on some subjects which had also been reviewed by
your committee, we feel that the whole is of such value that it should
be printed as a part of the evidence of your committee and this has
been done.
Likewise, the committee is indebted to any number of business
men who gave, unstintingly and willingly, of their time and services.
Your committee was interested, primarily, in the worker who
desires to work, who is seeking an opportunity for gainful employment, and who is unable to find it. There are others who might be
listed as "among the unemployed" but those who are not employed
because they do not choose to be employed, hardly constitute a problem for this committee.
The evidence taken shows the causes or the types of unemployment
might be divided into three classes, cyclical, seasonal, and technological.
Little necessity exists for describing these three classifications.
Cyclical unemployment has been like the plague; it has come and
gone at regular intervals until it has been accepted as a necessary
evil by some who should know otherwise. We do not believe, any
more, that it is necessary for the baby to have the diphtheria and
rickets and other " diseases of childhood." We have found and are
finding methods of preventing these diseases. We should recognize
also that there is an obligation on all society to attack, unceasingly,
the problem of unemployment.
Cyclical unemployment can be best attacked through the control
of credit, according to the experts who testified before your committee. It was the expressed view of these students that the Federal
reserve system has done and is doing a great deal toward this end.
We all know the story of progression and retrogression in industry
as told in the history of all cyclical unemployment. Although there
may be different causes and although no student seems to be able to
lay down a dogma as to causes which is universally accepted, the
results are much the same. We have the first evidence of increased
business, development of "better times" psychology, increased orders



and increased production, plant extensions, increased stocks on
shelves, extensions of credit and then the swing downward, a swing
which is merely accelerated.
And for labor, we have the inculcation of the practices of inefficiency which are definite marks of every period of overdevelopment
and overexpansion and then—unemployment.
As Dr. John R. Commons put it in his testimony before your
committee, " W e first demoralize labor and then we pauperize it."
We desire to call the reader's attention to the statement of Doctor
Lubin in the report of the Institute of Economics, which reviews the
incidents of cyclical unemployment at greater length and with more
pointed facts.
Seasonal unemployment is of more immediate interest because
here we have a daily problem, year in and year out, which confronts
the industrial leader and society in general. If the business men of
the country will solve this problem to the extent it is possible of solution, will eliminate this waste, the saving to industry will be two
billions of dollars a year, according to the testimony of Mr. Sam O
Lewisohn, a leader in many industries, who appeared before your
committee. Seasonal unemployment can be attacked in many ways.
I t is being successfully attacked in many industries as the evidence
will show. Discussion of these methods of attack will be found in
other sections of this report.
Technological unemployment covers that vast field where, through
one device or another, and chiefly through a machine supplanting a
human, skilled workers have found that their trades no longer exist
and that their skill is no longer needed. What becomes of these men?
What can be done about these thousands of individual tragedies?
What do these individual tragedies mean to society as a whole?
I t is an imponderable thing. Some of the experienced witnesses
who appeared before your committee stated that new industries
absorb the labor turned adrift by machine development. The automobile, the airplane, the radio, and related industries were suggested
as examples. Undoubtedly there is much truth in these statements,
but nevertheless we are not relieved of the individual problem. I t
offers little to the skilled musician to say that he, who has devoted
his life to his art, may find a job in a factory where radio equipment
is manufactured. Then there is the delay, that inevitable period of
idleness when readjustments are being effected, the suffering, the loss,
the enforced change in environment. True, this may all be " t h e price
of progress" but society has an obligation to try, at least, to see that
all this " p r i c e " does not become the burden of the worker.
This subject also will be discussed more fully under other chapters
of this report.
There is one other field of unemployment, the field wherein we
find the crippled, the superannuated, the infirm. This field constitutes a problem for industry and for society. I t is a growing field,
we believe. The man of mature years is not so successful when competing with a machine as is a younger man. The problem of these
men will also be touched upon in other chapters of this report.
Your committee is required by Senate Kesolution 219 to make a
report on the causes of unemployment. So many inquiries have been
made on this subject, so many conferences have been held, so many
reports made, so many volumes written, that it would seem impos*
sible to contribute anything additional of great value.



However, your committee feels that it has accomplished something.
We have striven to obtain an understanding of some of the conditions
which cause unemployment, of the machinery now had to detect
when and where unemployment exists, and of the existing facilities
for the treatment and the relief of the condition, once it is known to
I t is probable the survey could have been more comprehensive
and that the report of your committee might be more dogmatic, but
we emphasize that this is a so-called short session of Congress, and
that it is most difficult to accomplish a great work like this at a short
session. Senators are beset with two or more conflicting committee
meetings and they must choose between them. Because of this condition, it was impossible to obtain the constant attendance of all
members of the committee at all meetings.
Notwithstanding, your committee feels that it has contributed toward an aroused interest in the subject, that another effort has been
made to interest leaders in industry in the problem of stabiUzing
employment, that the evidence collected and printed in the hearings
will provide an opportunity for a better understanding of the whole
situation, and that as a result of this survey another advance has
been made in the effort to solve the difficult problem of unemployment.
Regardless of what may be said in 'derogation of conferences and
investigations, this survey shows conclusively that the unemployment conference, which was convened in 1921 under the leadership of
Herbert Hoover, did accomplish something. That conference aroused
the interest of some employers in the subject of stabilization. They
returned to their plants and began an effort to stabilize employment
in their industries. They attained some success and then more, and
as they succeeded and realized what they had gained, they became
missionaries in the field. Now, they have appeared before your committee and their testimony speaks for itself.
Before proceeding with a detailed discussion of the evidence, your
committee wishes to voice the opinion .that the unemployment problem can only be solved through constant struggle on the part of all
members of society. When your committee uses the word "solved,"
it merely means that an opportunity will have been given to everyone who really desires work. No one will question that every man is
entitled to the opportunity to provide for himself and his family.
T h a t is a fundamental right and society can not consider itself successfully organized until every man is assured of the opportunity to
preserve himself and his family from suffering and want.
If we consider the question from the viewpoint of duty alone, every
member of society has an obligation to assist in solving it. The employer, undoubtedly, has the greatest duty and the greatest responsibility. He is using labor to make a profit for himself and if he is
going to take the advantages of this system of society, he must
assume the obligations likewise. The laborer, or worker, or employee
has a duty to assist also because there is nothing more certain than
that, as every step forward is made in the solution of this problem, the
individual laborer or worker will gain tremendously.
I t is an interesting thing in this connection that the man who
must labor inevitably thinks most of steady employment, as the
evidence presented by the Industrial Relations Counsellors shows.
The fear of being " o u t of a job " i s one of the most demoralizing factors
in all the relations of man to his job and employee to his employer.



And it may as well be remembered that society is going to solve
this problem, is going to provide an opportunity for man to sustain
himself, or is going to sustain man. Society is going to provide an
opportunity for man to pay his own way or is going to pay for him.
Society may as well make every effort to do the job constructively,
because no society can be strong in which its members are encouraged
or forced to adopt the position and the place of those seeking charity,
and secondly, because when society pays the bill through charity or
through the cost of crime, the payments offer little possibility of any
advance for mankind.
Mr. Daniel Willard, president of the Baltimore & Ohio Railroad
Co., put the whole story rather pithily. In the first place, he described the old days of intensive individualism where goods were
produced, largely, in individual shops and by hand labor. Now we
have the tremendous factories, the mass production, and the wealth
pouring from machines and moving on for the benefit of society. If
society is going to take this benent, then society must also accept
the burdens, Mr. Willard suggested. A man out of work, discontented, and suffering, constituted a danger for society, he added. As
he put it, a man is going to steal before he starves, and the word
" s t e a l " may cover a multitude of other crimes—crimes perhaps of
the man who steals b u t crimes of far greater magnitude for that
society which permits a condition which induces or invites men to
Your committee will now proceed with the detailed demands of
the resolution and will discuss the subjects in the order in which they
are presented in the resolution.

The testimony of Commissioner Ethelbert Stewart, of the Bureau
of Labor Statistics of the Department of Labor; the testimony of
Dr. John K. Commons; of Mr. Bryce M. Stewart; of Mr. Morris E.
Leeds, and of a number of other witnesses, shows the necessity of
having adequate statistics of employment and unemployment. To
know there is a problem, that there is unemployment, and how severe
it is, is necessary before a successful attack on it can be made. That
seems so obvious it is hardly worth stating.
We have absolutely no figures as to the number of persons unemployed at any definite time. Commissioner Stewart explains that
situation in has testimony. He has made estimates on the "shrinkage" of employment. The unemployment conference of 1921, after
deploring the fact that there were absolutely no data obtainable on
the subject made its "best guess." Just last year, one dispute after
another arose in Congress over the number of men out of work. True,
the discussion was open to the charge of being largely political, but
political or otherwise, it should have served to have driven home the
point that here was a government without any machinery for knowing
whether it was afflicted with a disease to which might be added the
cancer that destroys government.
If we do not have accurate information on this subject, we may
rest assured we are going to have plenty of inaccurate information.



The subject is one which is very articulate in itself. Our experience
should be convincing that all this is so. And in this connection it
might be well to reflect on the truth that facts will permit sound
thinking and that an absence of facts produces a condition of fear
and panic which may be far more costly to the country than would
be the cost of maintaining a system of obtaining these statistics.
As to the method of gathering information, and as to what should
be gathered, there is cause for question and study. Statistics, to be of
any immediate value, must be gathered quickly, must give a true
picture and must permit of proper and correct appraisement. Inaccurate statistics are of no value, and statistics which are months
and years old are of about the same value as is the result of a post
mortem to a physician and no more so. They may have value in
dealing with the problem as a whole, but have no use in relieving
immediate necessity.
Commissioner Stewart proposes to develop statistics as to unemployment by measuring the shrinkage and the increase of employment
and unemployment in a considerable number of industries and by
applying to the norm the factors thus obtained. This should permit
a fairly accurate measurement of conditions to be obtained with
sufficient rapidity to meet any demand. But the norm must be
first established and Commissioner Stewart proposes to have it
established by an accurate census.
The Bureau of the Census should obtain the information t h a t
Commissioner Stewart desires and should obtain it at the next
census in 1930. The Bureau of the Census may say its other duties
would be delayed in this effort, but this work of building an efficient
system of measuring unemployment is far more important, in the
opinion of your committee, than a great deal of other information
obtained through the census.
As to supplementary statistics, these might and perhaps should be
obtained in any number of ways. However, it is the testimony of
witnesses before your committee that until we get a system of unemployment exchanges established in the various cities and States, it is
doubtful that we shall get a report more valuable than that proposed
to be obtained by Commissioner Stewart.


The Government now appropriates $200,000 for the work of the
United States Employment Service. The director of that service,
Mr. Francis I. Jones, appeared before your committee, and his testimony will be found in the hearings.
Your committee also directs attention to the testimony of Mr.
Bruce M. Stewart, to that of Dr. John R. Commons, and to the
report of Doctor Lubin, of the Institute of Economics.
As is shown by Doctor Lubin, the Employment Service is a result
of war experiences. When the country was mobilized for war purposes and the necessity existed to find a man for every place more
than a place for every man, a war unemployment machine was
developed. And, being regarded as an instrument of war, the machinery was scrapped in time of peace. Funds were not appropriated,
offices were abandoned, personnel dismissed, and of even more im



portance, the employers in private life who had maintained an active
interest in the unemployment exchanges permitted that interest to
The result is we have an unemployment service which functions as
a Federal organization only in the matter of placing farm labor and
which endeavors to function through grants of money, out of the
Federal appropriation, to assist in the maintenance of State or city
employment exchanges. The situation is one not conducive to building interest in the organization as it now exists.
As is shown by Doctor Lubin in his report, recommendations for
the establishment of public employment exchanges have been made
for two decades whenever a program for relieving conditions of unemployment was given consideration. As far back as 1916 recommendations were made that the country must first organize a national
system of labor exchanges in order to deal with the unemployment
problem, as Doctor Lubin shows. In 1921 the President's conference on unemployment recommended the formation of a national
system of employment exchanges and later this recommendation was
indorsed by the committee which prepared for Mr. Hoover a special
report on business cycles and unemployment. The conclusion of the
committee was that " t h e greatest promise seems to be in the development and raising to a high standard of efficiency of a national system
of employment bureaus."
The " p i n c h " of unemployment is rarely appreciated until it becomes personal. Epidemics of disease may afflict one section of the
countiy and arouse tremendous interest and even concern in the other
sections, but until unemployment becomes local and personal it
seems to arouse little fear. The man at work appears to have little
realization of how he is affected by the fact that his fellow man is out
of a job. The organization to handle the disease in this form should
be local also, it seems to your committee. I t should be one which
would be responsible to local conditions and one which is responsible
also to local officials, to local employers, and to local employees.
Doctor Commons advised your committee that the States and
cities should establish and operate the unemployment exchanges
and that the Federal Government should merely establish an organization of experts to coordinate the work of the local exchanges and
" t o bring up the standard" of those offices. Your committee is in
accord with the idea that the Federal Government should remain as
far away from the operation of those local offices as is possible. The
employment exchanges should be local, we repeat.
To be successful, in fact to be of any great value, public employment agencies or exchanges must have the confidence of those for
whom the exchanges are established, in other words for the employer
and the employee immediately interested. This confidence can only
be established through efficient operation of such offices. The personnel must have the ability to invite and induce and then to assemble information as to the needs of the employer and, having done
this, must perform the next function of making the contact between
the employer and the man who wants a job. If the office is efficiently
operated and deserving of the confidence needed for success, the endeavor will not only be to find a job for the man and a man for the job,
but will be to find the right man for the right job, to effect a placement
where both the employer and the employee will be pleased and likely
to remain so.



As Doctor Commons said in his testimony, " t h e best employment
agencies in the United States are not the public employment agencies
but they are the employers themselves." He added that he "did not
believe that we can have public employment offices in this country
until the employers are willing to support those offices."
In other words, the employers who have the most intimate touch
with the opportunities for labor, must have sufficient confidence and
interest in the employment exchanges to make use of them. The
labor or unemployment exchange must become to the employer for
labor purposes just what his bank is for purposes of obtaining capital.
Discussing the organization of employment exchanges, Doctor
Commons offers the example of the Milwaukee office, which is conducted and maintained by the local governments, State and city.
There, he testified, we had for years the experience connected with
an employment exchange which existed for itself and for jobs for the
personnel. Then the personnel was placed under civil service rules,
candidates for positions were graded in accordance with educational
qualifications and experience and then an advisory committee, representing organized employers and organized labor, selected the best
candidate for director of the office. This man was appointed. To
the criticism that the unorganized worker is not represented in this
plan, Doctor Commons replies that the organized employer always
takes care of the unorganized worker and adds that " t h e plan has
Aside from the Wisconsin offices, there are efficient exchanges in
some other States, although the number is so small that it does not
even offer the skeleton of a national system. Thirteen States, as
Doctor Lubin shows, have no employment offices whatsoever. In
11 States there is only one office and in other States the number of
offices vary up to the point where 17 offices are found in the State of
Illinois. The amounts appropriated by the States also vary tremendously. In Wyoming, for example, $900 is granted for the work,
and from that point the State expenditures for this purpose increase
to the point where $231,360 is spent in Illinois. The total appropriations of all the State governments aggregate only $1,203,906.
Aside from these general services on the part of the Government of
the United States and upon the part of State governments, the
United States Employment Service conducts a farm-labor division
which has temporary offices at important points in the agricultural
States. Critics who have studied the work of the service concede that
this is an important task and that it is well done.
In view of this very limited service throughout the country, in
view of the few offices conducted and the apparent lack of interest,
is there any cause for amazement in the fact that private employment
exchange* thrive in many cities, and thrive despite the manner in
which some of the private exchanges are conducted—to not always
cast credit r»n the business?
The burden of assisting the unemployed to find work should be
borne by organized society through the maintenance of efficient
public employment exchanges. Efficient public employment exchanges should replace private exchanges. Private employment
exchanges which merely attempt to make contact between a worker
and a job, which are operated for profit and solely for profit, present
a situation where there are conditions conducive to petty graft. Such



rac tice at the expense of the unemployed is a crime which should not

« e tolerated.

Your committee might summarize its views on this subject in this
1. The existing United States Employment Service should be
2. The director and every employee of the service should be selected
and appointed after a rigid civil-service examination.
3. The administrative features of the civil-service examination
should permit the cooperation of organized industry and organized
labor in weeding out the candidates for these places, at least the
place of the executives.
4. The service should become an organization of experts whose
duties would be to coordinate the work of the States.
5. Aside from compiling statistics and endeavoring to arrange a
plan which would permit the Government to be advised promptly and
accurately of conditions throughout the various State exchanges, the
Federal service should not be active. In other words, the Government should remain as completely detached from the operation of
exchanges throughout the States as it is possible for it to be.
There has been some question of the plan now in vogue whereby
the Government contributes financial assistance to the State offices.
Witnesses before your committee insisted unemployment anywhere in
the country was of national concern and therefore should be treated
to some extent with the aid of the Government. But it is certain that
some definite system or plan should be devised under which the
Government should grant this money to the States if the Government
assistance is to continue. The Government expert should make
certain that the Government was not contributing to inefficiency in
the service.

In connection with this subject your committee recommends the
reading of the testimony of Dr. John R. Commons, of the Institute
of Economics, and the Industrial Relations Counsellors, as well as
the testimony of the business men who discussed conditions in their
own industries.
We think it is generally agreed by the witnesses that at the present
time the following conclusions would be drawn from the evidence:
1. Government interference in the establishment and direction of
unemployment insurance is not necessary and not advisable at this
2. Neither the time nor the condition has arrived in this country
where the systems of unemployment insurance now in vogue under
foreign governments should be adopted by this Government.
3. Private employers should adopt a system of unemployment insurance and should be permitted and encouraged to adopt the system
which is best suited to the particular industry.
Until an opportunity or some cause such as this survey is had to
focus attention on the industrial developments in this country, little
consideration is given to the accomplishments such as we find in the
field of stabilizing employment.



Undoubtedly there are not sufficient industrial leaders who are
interested as yet, but there is cause to believe they will be, and simply
because of economic pressure. It seems reasonable to assert, from
the testimony taken during this survey, that the employer who does
not stabilize his employment and thus retain his experienced workmen is the employer who is going to fail.
Just as the efficient business man is stabilizing the return for
capital invested, by building up reserves for dividends, so shall he
establish a reserve for return to labor in the hours of adversity,
according to the well-founded arguments advanced by business
men. And why? The testimony from witness after witness stresses
the point that there is no suggestion of charity in this effort, no idea
of being philanthropic, no desire to have industry to become paternalistic. True, in most cases the plans were started because an industrial leader became conscious of some of his obligations to society.
But there is general accord on the proposition that the plan is "good
business," that it has increased profits.
One witness asked, "Shall the business man who expands his
business without consideration for future requirements escape his
responsibility ?"
Mr. Morris E. Leeds, of Leeds & Northrup, described his theory as
I was convinced a good many years ago of the element of unfairness and social
wrong that modern industry had gotten into by freely hiring people and with
equal freedom, firing them.

Mr. Daniel Willard said:
It seems to me that those who manage our large industries, whatever the
character of their output may be, whether it be shoes, steel, or transportation,
should recognize the importance and even the necessity of planning their work so
as to furnish as steady employment as possible to those in their service. Not
only should that course, in my opinion, be followed because it is an obligation
connected with our economic system, but I fully believe that such a course is
justifiable from the standpoint of the employer because it would tend to develop
a satisfied and contented body of workmen which of itself would improve efficiency
and reduce costs.

The testimony speaks for itself and everyone interested should read
it. At this time there is nothing that can be recommended on this
score in the way of legislation. However, your committee can express
the hope that organizations of capital and of labor and that officials
of the Federal and State Governments shall never lose an opportunity
to inspire thought and discussion on this question of the necessity
and the advisability of stabilizing employment within the industries
Stabilization has been sought and obtained in various ways. One
employer has placed practically all his workers on a salary basis, has
assured them of a continuous wage throughout the year, and has placed
upon them the responsibility of making the industry succeed. Others
have established reserve funds and have so arranged them that executives and workers strive to prevent them from being drained. Others
have so ordered their production that it is spread throughout the year.
Otters have begun the production of articles which are related to the
general business plan but which can be produced in periods which
formerly were marked by idleness.



The testimony is fairly convincing that stabilization can be accomplished in industries which were once regarded as being seasonal in
their every aspect.
Fifteen bills dealing with unemployment insurance have been introduced in six State legislative bodies since 1915, and none of them has
been successful. Probably the so-called Huber bill, introduced in
the Wisconsin Legislature, came nearest to adoption, and its author,
Doctor Commons, advised your committee that it "was as dead as
anything could be."
In many industries, as the evidence will show, a reserve fund for
unemployment which offers protection in the form of insurance has
been adopted. The testimony of Doctor Commons as to the practice in the Chicago clothing industries is important as well as the
reports of the Industrial Relations Counselors.
Whatever legislation is considered on this subject, your committee
is convinced, should be considered by the States. The States can
deal with this subject much better than can the Federal Government.
But in any discussion of legislation, your committee thinks consideration should be given to the arguments of Doctor Commons—that
the plan of reserve funds or insurance confined to one company or
plant rather than to all industries, should be adopted.
Doctor Commons stresses the fact that the insurance idea as practiced in the Chicago market follows the experiences gained from the
adoption of disability compensation plans in various States. Employers were moved to adopt every precaution against accidents when they
realized that accidents were costly under the plans for disability compensation. In the same way, employers and employees will be more
likely to fight the causes of unemployment within their industries
when they have seen tangible evidence of the cost of unemployment,
according to the arguments advanced in this evidence. On the other
hand, Doctor Commons insists that, "the paternalistic and socialistic" schemes adopted in foreign countries, penalize success in that
the employer who stabilizes his employment does not escape the
burden of paying for unemployment in other industries.
Your committee can not leave this subject without suggesting that
consideration be given to the benefits of stabilized production—the
finer morale of the workers, the better workmanship, the increased
production, the lowered costs of production, and the elimination of
the cost of training the unskilled recruits. The testimony proves
conclusively that the workers who cooperate with their employers
and who are given a chance and encouraged, contribute tremendously
to the success of the enterprise.

This subject covers so vast a field that it also immediately becomes
imponderable. To exhaust it seems impossible. A committee of
Congress could proceed with a study on this one phase of the unemployment problem and could continue indefinitely.
The general opinion given your committee on this score is that
undoubtedly just at this time we are experiencing a program and a
problem which are no different to those occurring since the advent of
machines in industry. The difference is, however, that undoubtedly



at this time the developments are far more extensive and far more
intensive than they have ever been in our history.
Of course there is going to be individual suffering, for example,
the suffering of the musician who discovers that a machine is forcing
him to forego his life work and to seek employment in new fields.
How to answer the many questions which arise with every minute
of consideration for this topic, is what makes the subject imponderable. The printed evidence contains suggestions of the shortened
working day and the reduced working week, has contentions that
new industries are arising constantly out of the graves of departed
trades and the workers are thus absorbed. Your committee is convinced, however, that it is the duty of society to provide for these
workers during the period of readjustment, as many employers are
now doing.
Conflicting opinions are offered as to the effect of the vast consolidations of wealth. One side contends that the day of the small
business man is passing, that the individual merchant can no longer
compete with the national chain, while another will contend that no
nationally organized chain can overcome the personal effort put into
a business by the individual business man.
However, in the time your committee had for this subject no
opportunity presented itself for the consideration of legislation on
this subject, and your committee has nothing to suggest at this time.

Another committee of Congress, the Committee on Commerce, has
considered this subject and has reported legislation which is now
before the Senate. The legislation is commonly referred to as the
" Jones prosperity reserve bill." Your committee would suggest that
the evidence submitted with reference to that bill should be read in
connection with this study.
There is some testimony of interest on this subject in these hearings, but your committee did not devote a great deal of time to this
topic, because no one disagreed with the suggestion that the Government and all other public agencies should so order their public works
that they would offer a buffer in time of unemployment.
The evidence is very clear that the Federal Government may set
a valuable example to the States in the adoption of a practical scheme
for the planning of public works. Of course, the States and the other
divisions of Government will have the greatest opportunity to provide
this buffer because the expenditures by the Federal Government
for public works are not large as compared with the expenditures
by the States and other civil divisions. There should be no delay
upon the part of the various Governments, Federal, State, city, and
other minor subdivisions in the adoption of such plans.
There are minor objections to this scheme but your committee is
convinced they can be overcome without difficulty.

Your committee has discussed this j>hase of the survey as it has
proceeded with this report and there is little to add. In general,



it is the opinion of your committee that the responsibility should be
kept as "close to h o m e " as is possible. Private agencies should make
the first effort and should do everything they can for themselves.
The States should contribute only that service that private agencies
would find impossible and the Government should merely coordinate
the work of the States and supply any effort which is entirely and
purely of national character.
Your committee will now endeavor to sum up the suggestions and
1. Private industry should recognize the responsibility it has to
stabilize employment within the industry. The Government should
encourage this effort in every way, through sponsoring national
conferences, through publishing information concerning the experience
had by industries in this work, and through watching every opportunity to keep the thought of stability uppermost in the minds of
2. Insurance plans against unemployment should be confined to
the industry itself as much as possible. There is no necessity and no
place for Federal interference in such efforts at this time. If any
public insurance scheme is considered, it should be left to the State
legislatures to study that problem.
3. The States and municipalities should be responsible for building
efficient unemployment exchanges. The Government should be
responsible for coordinating the work of the States so as to give a
national understanding of any condition which may rise and so as
to be able to assist in any national functioning of the unemployment
4. The existing United States Employment Service should be
reorganized, and every employee should be placed under civil service.
5. Efforts should be made to provide an efficient system for obtaining statistics of unemployment. The first step should be taken by
the Bureau of the Census in 1930, when the bureau should ascertain
how many were unemployed as of a certain date and how many
were not seeking employment and yet were unemployed as of that
6. The Government should adopt legislation without delay which
would provide a system of planning public works so that they would
form a reserve against unemployment in times of depression. States
and municipalities and other public agencies should do likewise.
7. Further consideration might well be given to two questions,
the effect had on unemployment by industrial developments such as
consolidation of capital, and the necessity and advisability of providing either through private industry, through the States, or through
the Federal Government, a system of old-age pensions.




Henry S. Dennison
Sam A. Lewisohn.
Ernest G. Draper
William Powers Hapgood
William Green
A. C. Bennett.Daniel Willard
O. S. Jackson
James T. Loree
J. M. Larkin
Fred M. Sargent
W. J. Burns
Jackson Johnson
William Cooper Procter
H. F. Johnson, jr
Donaldson Brown
Alexander Bing
M. A. Styles





Bryce M. Stewart
Whiting Williams
Memorandum on employment exchange legislation in foreign countries
Memorandum on the organization and administration of public emploj*ment offices in foreign countries.



Ethelbert Stewart
Francis I. Jones
W. A. Berridge


Gardner S. Williams
Otto T. Mallery



Morris E. Leeds
John R. Commons
Hart, Shaffner & Marx unemployment insurance agreement
Benjamin M. Squires
Huber unemployment insurance bill
Huber bill revised
Industrial Relations Counsellors (Inc.)
Metropolitan Life Insurance Co
Mary B. Gilson
Mollie Ray Carroll



Isador Lubin




Washington, D. C.
The committee met, pursuant to call, at 10.30 o'clock a. m., in the
committee room, Senate Office Building, Senator James Couzens presiding.
Present: Senators Couzens (chairman), Phipps, Tyson, Walsh, and
Present also: D r . Isador Lubin, economist of the Institute of
Economics of the Brookings Institution, Washington, D . C , assisting
the committee.
The CHAIRMAN. This meeting was called for the purpose of carrying out the Senate's instructions under Senate Eesolution 219, and
for the purpose of having it clear as to what we are here for I will
read the resolution:
[S. Res. 219, Seventieth Congress, first session]

Whereas many investigations of unemployment have been made during
recent years by public and private agencies; and
Whereas many systems for the prevention and relief of unemployment have
been established in foreign countries, and a few in this country; and
Whereas information regarding the results of these systems of unemployment, prevention, and relief is now available; and
Whereas it is desirable that these investigations and systems be analyzed and
appraised and made available to the Congress: Therefore be it
Resolved, That the Committee on Education and Labor of the Senate, or a
duly authorized subcommittee thereof, is authorized and directed to make an
investigation concerning the causes of unemployment and the relation to its
relief of (a) the continuous collection and interpretation of adequate statistics
of employment and unemployment; (b.) the organization and extension of
systems of public employment agencies, Federal and State; (c) the establishment of systems of unemployment insurance or other unemployment reserve
funds, Federal, State, or private; (d) curtailed production, consolidation, and
economic reconstruction; (e) the planning of public works with regard to
stabilization of employment; and (f) the feasibility of cooperation between
Federal, State, and private agencies with reference to ( a ) , (b), (c), and (e).
For the purposes of this resolution such committee or subcommittee is authorized to hold hearings and to sit and act at such times and places: to employ
such experts and clerical, stenographic, and other assistants; to require, by
subpoena or otherwise, the attendance of such witnesses and the production
of such books, papers, and documents; to administer such oaths and to take
such testimony and make such expenditures as it deems advisable. The cost
of stenographic services to report such hearings shall not be in excess of 25
cents per hundred words. The expenses of such committee, which shall not be




in excess of $15,000, shall be paid from the contingent fund of the Senate upon
vouchers approved by the chairman. The committee or subcommittee shall
make a final report to the Senate as to its findings, together with such recommendations for legislation as it deems advisable, on or before February 15,

The CHAIRMAN. First I want to say for the benefit of the committee that during the recess of Congress the Institute of Economics,
at Washington, through its staff, have been very helpful in cooperating with the secretary of the committee and myself in getting witnesses who are familiar with the subject and who have evinced an
inclination or willingness to come to the committee to testify as to
their experience and make recommendations. We have a list of the
witnesses who have promised to be here. This will carry us along
until about the 20th of the month, sitting every day. The first witness we have here who has volunteered to testify is a man of great
experience—Mr. Henry S. Dennison, president of the Dennison Manufacturing Co., of Framingham, Mass. I shall be very pleased if Mr.
Dennison will tell us his experience and training along this line.
Mr. DENNISON. Mr. Chairman and gentlemen of the committee:
If it is agreeable to you, I will talk principally about the measures
for diminishing unemployment that largely have been worked out
and found successful. And in any discussion of what can be done
about unemployment I want to emphasize my belief that it has got
to be thought of under three separate divisions. The three are all
unemployment. When built up on each other they sometimes make
the situation worse, but from the point of view of any cures or steps
toward betterment it is very helpful to consider them separately; in
fact, I think quite necessary.
The first I want to speak about is the unemployment that comes
with times of depression, whether you call them parts of the business
cycle or not. There have been in the past dozens of periods of depression. We don't fully understand why they come, but they do
come, and it would be very unwise to suppose we are through with
them. They will very likely come along again in the future. Anything that is to be done toward mitigation or diminution of unemployment that arises from the cycle is separate from that which has
got to be done for unemployment from other causes.
The next is the annual seasonal unemployment. It occurs every
year; it occurs in good times as well as in bad, but, of course, rather
less in good times than in bad. Certain businesses shut down in
certain months of the year. Others are irregular and shut down at
irregular periods during the year. I t would be foolhardy to attempt
to improve some of them, like cutting ice in the winter. But, on the
other hand2 there are a great many of the seasonal irregularities in
manufacturing that can be conquered that have in fact been distinctly reduced in the last four or five years. A good deal of work
has been done lately by some companies to reduce seasonal irregularity.
And the third, for lack of a better name, may be called " transitional." That takes place when people who don't fit their jobs are
discharged, or quit, or when people are discharged on account of



changed processes. Until these people find other jobs they are among
the unemployed.
These three I shall treat separately, from the point of view of
reducing the amount of unemployment. I don't want to say prevention or cure, because I don't think there are such things in any
absolute sense.
I will take these three in reverse order. To find the causes of
transitional unemployment we should turn first to the record of the
turnover; that is, the number of hirings and firings that go on in
various concerns. Obviously, the more people that are hired and
fired the more people there are out looking for some new job somewhere. To account for the fairly large amount of transitional unemployment which exists at all times we find that the turnover figures
are enormous. The figures were shocking when they were first
shown up. The first work on this was done by Magnus W. Alexander, who was then with the General Electric Co. He issued a pamphlet showing the number of people going from one job to another;
and it almost seemed as if some employers were in the habit of
firing workers just for the fun of it, or because they didn't like the
necktie the worker had on. This was, perhaps, not uncommon in the
old days. The cutting down of turnover is being pushed in industry
pretty freely now, but still the figures are quite large. It is not
uncommon, in fact, for the average or median figure for turnover to
be from 50 to 60 per cent per year. If you have a thousand employees, let us say, you would hire and fire 500 to 600 in order to
keep that group up to a thousand. Turnover can not be entirely
eliminated, of course. It will always be present because of girls
leaving to get married, and people leaving the community, but a
tremendous amount of it can be prevented.
The CHAIRMAN. Are those figures the present figures, or are they
for some previous period?
Mr. DENNISON. They are figures for the present time and show the
best records we have had for a long, long time. Here are cases back
in 1925 showing a turnover of 230 per cent, where industries were
hiring and firing 2,300 men in order to keep the establishment up to
1,000 men.
Senator TYSON. I S that for a particular line of business ?
Mr. DENNISON. That represents the metal trades—230 per cent for
the metal trades in Milwaukee and Detroit. And it was 200 per cent
in the New York and Philadelphia group.
Senator WALSH. Who collected those figures ?
Mr. DENNISON. The Metal Manufacturers' Association, of Philadelphia. There are some figures collected by the Metropolitan Life
which show considerable progress. Still there is a lot to be done
and it can be done by letting the business men know, just as Mr.
Alexander did, that it carries the possibility of a very considerable
saving to them; and, incidentally, of course, it is a distinct saving to
The next step, granting that turnover is down to a practical minimum, is to have employment exchanges. When we get the turnover
down to the best figures, to facilitate the transition, so that the
workers don't have to go from door to door, employment exchanges
fit in. They have other uses, of course, but that is a oasic use.



Now, seasonal unemployment is a very serious matter and savings
from its elimination can be of great importance both socially and
economically to the country. I t is obviously poor management, that
is to say, it is very expensive for management to run a plant full
time for 8 months and slack for 4, or partly for 10 and not at all for
2, as a good many do, for when a plant is shut down overhead expenses continue to go on. I t is a very common experience in industry
that there should be irregular periods of employment. Periods of
seasonal unemployment vary in extent, and they vary as among industries. The ways of overcoming them, of course, vary among the
industries on account of the special problems each has. Yet in general they can be more or less roughly classified.
The companies that have undertaken regularization policies are
considerable in number. Mr. Feldman went into the matter two or
three years ago and wrote a very good book on the subject. He included some 43 companies, and a survey made since that time shows
about 40 more companies. There has been definite work done,
enough to prove that work can be done and done successfully, that
is, profitably. The throwing of people out of work seasonally is a
thing we will always have to a limited extent. There will always
be some girls in candy factories and in hotels thrown out of work
seasonally. Resort hotels want more employees in summer than they
do in the winter, and workers can not always be distributed about.
But it is the preventable cases that we want to work toward diminishing. And, as I say, such work is profitable to both sides. It keeps
up the morale and income of the workers and it calls for no sacrifice
on the part of industry; on the contrary it cuts costs. But the idea
needs advertising, it needs a knowledge spread widely around that
it is practical.
The commonest cause of seasonal employment arises from the placing of special orders for special seasons. Special orders for clothing
is a typical case. Certain kinds of clothing are not ordered until styles
have been announced, and then are rushed at the very last minute.
With other kinds of goods this seasonal variation has been helped
by putting responsibility on the selling department to get seasonal
orders as early as possibly and by giving special terms for early
In our own case the success of our attempts to get early orders
was really amazing. Jewelers want their boxes chiefly in the fall,
and it was a tradition that they didn't place their orders for them
until April or May. We wanted to handle them in January, and
once we made a serious effort to do so, we had very little trouble
in persuading jewelers to place their orders at the earlier date. That
isn't a typical case, but it illustrates many cases where we all are at
fault in failing to tackle the problem.
There are a variety of devices for helping to get special orders
early for later shipment so that production can be taken care of
smoothly and regularly, such as advance dating, which is quite common. Placing an early order with one paper house entitles the
buyer to an advanced dating of two months or so. Special pricing
also has been tried in a variety of industries.
Then, too, a number of concerns have definitely set about bu,ilding
up an out-of-season business. One shovel plant which sold its prod



uct in summer took up the manufacture of sleds which can be sold
in the winter. One of the reasons the Carter people put pens and
pencils in their line was because the seasons for these products
matched perfectly with the seasons for ink and glue. The season
for ink was quiet in winter—because of ink freezing they had to
ship in the early fall and not again until spring. Pens and pencils
could be shipped in the winter months. A good many concerns dovetail side lines with their other goods. These side lines which can be
sold in the off seasons are supplemental to the main lines and help
to regularize employment.
The changing over from production for special orders to production for stock, that is, having staple goods replace special orders
wherever possible makes for regular employment. Staple goods can
be carried in stock. There are, of course, some products that can not
be manufactured in advance, automobiles are goods that can not be
over heavily stocked, but a very large proportion of the goods
handled in this country can be stocked and to good advantage. If
we produce staples and know roughly how they are going and don't
depend entirely on the special orders, we can adjust our output so
as to keep oar forces regularly employed. In our own concern we
figure out how our orders are likely to come in and adjust our production in such a way that we can work regularly, irrespective of
the exact time when orders do arrive.
Senator WALSH. Are these discussions carried on among manufacturers and those who employ help ?
Mr. DENNISON. Yes; but only crudely. They are the methods that
have proved themselves and are being more and more discussed.
Senator WALSH. An active campaign of discussion along these
lines would be helpful, wouldn't it?
Mr. DENNISON. Anything that would emphasize the desirability of
eliminating unemployment would be nelpful. We have been at it
since 1914, when we were severely hit by a depression. Since that
time, in Massachusetts, those that got into the middle of it realized
that regularization was the cure for that sort of thing.
Senator WALSH. Has much been done to regularize employment?
Mr. DENNISON. Taking the country as a whole, not much has been
done. Those that have done it have done well, but they form an
extremely small proportion of the total number of business men.
Senator TYSON. I S there very much competition in your business?
Senator TYSON. DO


you have very much change in prices for your

own material?
Mr. DENNISON. Not very much.
Senator TYSON. Therefore you have a special advantage, so that
your production can be distributed very easily over parts of the year.
Where the prices of material have varied, such as on cotton and
wool, you would have a different proposition.
Mr. DENNISON. Cotton and wool don't have very much trouble
spreading over. When I was familiar with the situation three years
ago, the cotton manufacturer hedged. He buys his cotton on futures,
and thus his costs for raw material are fixed.
Senator TYSON. My experience is contrary to that. They make
up two seasons a year—lights and heavyweights. That is what you



are speaking of. If wool is staple, that would be one thing; if
cotton ,is staple, that would be another. My experience, at least,
is that in both cotton and wool you will find that they buy two or
three seasons a year. They can not easily produce for stock, although
they are getting more and more to do that now. I think you are
doing the right thing if it can be done. In some industries you have
a lot of orders at one time and don't have any at all at another time.
Mr. DENNISON. A complete cure can't be had. When industry
starts in to improve and discovers for itself the varied financial advantages of eliminatiing waste, it usually finds some more waste
which it can save. If the same ingenuity could be applied to the
problem of employment as has been applied to the question of the
installation of machinery, we should have a great improvement. We
will not entirely cure it, but by constantly eating into the waste pile
we will decidedly improve the seasonal problem. If the problem is
a serious one, as it is in many cases, it is necessary to look over all
possible ways of reorganizing the particular industry concerned. I t
is possible in a good many cases, where the irregularities of employment come at regular times, to plan in advance of certain fluctuations and keep production more or less stable. If this attitude is
developed in all of those industries where an attack can be made
upon seasonal irregularities, we can well find a way to cure seasonal
unemployment. In those remaining cases where nothing can be done
about it, it would not be of such importance as to cause any serious
national question. If individual employers or managers of business
can be made to tackle the problem seriously, I think it will be reduced to a relatively unimportant one.
Finally, effective training of operatives in supplemental jobs is
being carried on in many plants more and more actively. We formerly thought that a person could only be successful on one job.
Experience, however, has shown rather the reverse. There are certain people who can be transferred from job to job and gain great
skill in two or three jobs.
American business is taking to the budget system more rapidly
than ever before. The budget forces us to look ahead, and it clarifies
more and more the special losses that we undergo in business. Without a budget we do not see when our losses are incurred. We are
unable to tell whether they are concentrated in August, September,
or December, but when we lay out a budget these special conditions
are brought very much into prominence.
The measures for regularizing employment, then, are various.
Many measures for the prevention of seasonal unemployment are
relatively simple, and I think that they should be spread abroad
among all business men.
So far as unemployment growing out of the business cycle is concerned, we have a much more difficult problem, and one which, when
it does come, is a more serious problem than the other types of unemployment. Yet I suppose we could get through a business cycle
without great suffering and loss if we could keep cyclical unemployment from piling up on top of seasonal unemployment, as it did particularly in 1914.
The country is well-to-do when people are unemployed. Somehow
or other we can't put them to work during business depressions, be



cause we are too well off. We have too many goods. How to eliminate the business cycle is not an easy question to answer. Those who
had experience with the 1914 unemployment problem know how
suddenly it came upon us and how severe the problem was. The first
thing to" do in order to flatten out the business cycle is to increase the
knowledge at the command of business men. The Department of
Commerce has been working to this end constantly. We can not have
too much information. The more widely the knowledge of present
conditions spreads the better chance we have that people will gauge
their activities on actual knowledge rather than by guesswork and
snap judgments. The first thing to do in order to mitigate the conditions of the business cycle is to know more and more about conditions, such as stocks on hand, production, and the activities of other
businesses. This sort of information is now being collected and disseminated by the Department of Commerce and by private agencies
as well.
The Government can help in moderating the business cycle by
making a provision for public works during periods of depression.
Private industry should also make reservations for periods of depression and keep back certain work which otherwise would be done in
times of prosperity. In the President's unemployment conference it
was perfectly obvious that once we get into a hole we are at a very
great disadvantage, and that the measures for mitigating the evils
of the cycle are not to be taken after the depression is upon us.
When we attempt to do things when already in a period of depression we are undertaking nothing but patch work. The way to reduce
the swings from extreme prosperity to extreme depression is to control ourselves during prosperity and not go the limit and " blow '* ourselves for everything when the going is good. We have to learn that
in every branch of life. It is a healthy lesson, anyhow.
During the panic of 1907 most people were absolutely dumbfounded. They acted as if that sort of thing never had happened
before. There were only a few people, like Mr. Schumann, in Boston, who had made provision for such a thing. The rest of us
believed that each panic was the result of some unique individual
cause. Somebody's name was usually attached to each panic and we
felt that the individual whose name was tied up with it was the
determining cause. Yet you can go back and find them recorded
time after time, dozens of them, in history.
When we are able to estimate with reasonable correctness what
stage of the cycle we are in at any moment then we can make some
provisions for the future. We must, therefore, cultivate among
our business people the idea of reserving activity—holding back—
and not blowing ourselves in peak times.
The CHAIRMAN. This system of installment sales, or consumers'
credit, was that merely a method for keeping up our unusual
prosperity ?
Mr. DENNISON. I don't think anybody can answer that question
with full knowledge. I think that all we can have are our own
tentative views. My own view is that installment buying did not
materially affect the character of the swing. It was rather like a
dose of greenbacks. It meant from three billions to five billions
of additional purchasing power rather rapidly thrown into the



economic situation, and it served about the same as though wc had
increased our currency. There is a limit to this, however, and I
believe the credit institutions of the country will always limit the
extent to which we can use the installment system for buying.
The CHAIRMAN. S O that the benefit from this consumers* credit
can not continue to grow?
Mr. DENNISON. N O . I t is the kind of medicine you can take once.
If you take two doses you are in a bad way. I t is like inflation—
if controlled it is all right.
The CHAIRMAN. Was it wise to have taken the first dose?
Mr. DENNISON. I think so. I don't see why not. Under control
I don't see that that is a bad thing at all. I t it got out of control
it would be very bad. But the same can be said of everything.
Senator W ^ L S H . When an effective cycle of depression comes,
though, won't the depression be sharper?
Mr. DENNISON. We haven't been through a real depression since
the installment system has become prevalent, although some people
think it won't make any difference, for Ave went through a moderate one in 1924, when there was a good deal of installment money
out. A good many are ready to say 1927 was not too active in some
lines and that installment buying did not seem to show any unfavorable effects then. I think, as I have said, that installment buying
is like a dose of greenbacks, and if limited to a certain amount it
changes the situation for the moment, but will have no lasting bad
The CHAIRMAN. What was the advantage of taking it, then, if it
only tended to speed up business?
Mr. DENNISON. I t put us just that much ahead, and if there was
no bill to pay afterwards and no extra cost it did no harm. Some
individuals have overplayed it, of course.
The CHAIRMAN. If that was successful why not keep on trying it ?
Mr. DENNISON. One dose is all right, but more than one dose may
do us harm.
Senator TYSON. Does not installment buying help consumption
Mr. DENNISON. I t is the same thing as inflation. There is nothing
bad about a single dose of inflation. The trouble is you can't
stop it after you get going. I t is like morphine. There is
nothing bad about one close if you can stop at one. I n installment
buying there is always a final check in the bankers who control the
credit situation and there is a limit to the amount of credit they will
extend for installment purchases.
The CHAIRMAN. YOU don't believe, then, there is to be any deflation
after the first inflation that you spoke oi?
Mr. DENNISON. If it is just an ordinary dose. I t is conceivable that
England could have gone on at $3.80 to the pound. France did not
deflate, England, however, was proud and would have been hurt.
Inflation in itself is not necessarily a bad thing. I t must be controlled, however. I am not an economist and my word must not be
taken too seriously on this, but to my mind the worst dangers of
inflation are obviated if we can be certain of keeping it under close



The CHAIRMAN. The trouble in regard to it, to use your analogy, is
that if you took a dose of morphine and you liked it, you are very
likely to t r y it again.
Mr. DENNISON. Yes. That is the reason why printing greenbacks
is deadly. Installment buying, however, is not fatal because it carries its own cure. You get enough pretty soon and you don't want
any more. Your credit structure saves you. That is, I think, the
advantage of it as against other methods of inflation.
I n handling cyclical unemployment we come to the consideration
of public works—city, State, and national—in just exactly the same
way we would consider the work of corporations. A t the height of
prosperity when all are active is the time to do not quite so much.
When conditions are slack is the time to do more. To accomplish
that we certainly have got to do some advance planning. I n 1914
all the States were ready, more than ready, to do everything they
could to help out in the situation, but when they undertook to do so
they found that it would take six months before they could put a
single shovel into the ground. Senator Walsh remembers that during
the depression of 1914 we attempted in Massachusetts to drain the
Bridgewater Swamp, but before engineering reports could be in and
plans could be made, a year and a half would have passed. Without
advance planning, anywhere from six months to a year is taken up
before a bit of work can be done.
I n all the Government units we should establish the custom of
planning public works in advance, and then control ourselves so as
not to carry them on just because they were planned. With private
companies the same control is necessary and the public must face
this same question. To control the cycle is to control ourselves.
Senator TYSON. YOU testified before the Committee on Commerce
on the so-called Jones bill, did you not ?
Senator TYSON. You

are in sympathy with the principles of the
Jones bill?
Mr. DENNISON. Yes, sir; I think those principles ought to be
adopted. If the principles are adopted much more can be done than
could be written into any bill. I n our company when we undertook
advanced planning, we did so because we got so deeply involved in
1914. We laid out a program for ourselves—we wrote our own
" Jones bill," and then worked it out. Soon it became so automatic
that now we don't need any Jones bill. I n times of great activity, for
example, we realize now that we don't need so much advertising, the
factory is full anyhow. The time for heavy advertising is when
business is slow and we haven't full employment for our force. An
entire reversal of mind was necessary and we have found that our
minds have been reversed automatically once we have put in a system
of advance planning. When we make"our plans the first of the year,
if it looks as though we are going to have an active year, we find that
that is the time to say " W h a t can we trim from here and there ? "
If it looks as though it is going to be an inactive year, then we should
put in tonics to spur or increase our selling efforts to meet the situation.
I am confident that if we give the Jones bill a fair chance it will
start a custom that will be stronger and have greater effects than any



other single bill could have. And, of course, it will have its reverberative effects on the States and the cities. We must impress upon
our people the doctrine that we must control ourselves during periods
of activity. We must study what is going on and carry out a long range
program for the good of the social and industrial structure. Reserving public works for periods of inactivity means getting raw materials at periods when prices are easier. If prices are not easier we
can at least get better workmen at the same wages that we would
have to pay for inferior workers during periods of great activity.
During periods of unemployment the best men, working at their best
pace, are usually available at normal wages. If we attempt to do
our work in busy times, even if the wage rate is the same, our workers will not necessarily be of the higher level. I t is best to do more
during times of unemployment than during times of great employment.
Senator TYSON. I want to ask you. what about production—do you
think the country can produce more than it can consume in nearly
every line of endeavor?
Mr. DENNISON. I t can be done temporarily, I believe. I think that
there is a rate of increase in consumption that perhaps we might not
exceed safely. I do believe, however, that consumption can increase
ad infinitum.
Senator TYSON. YOU can't increase consumption unless you have
somebody that can buy, and in order to buy a man has got to be employed. Now, take the cotton machinery in your own State. I f all
the cotton mills in New England were going overtime we would come
eventually to the point where they wouldn't have this unemployment.
Don't you think the country would soon be overstocked?
Senator TYSON. Assuming

that the present hours of labor were to
continue and full-time employment given to everybody, don't you
think that the country would be overstocked in a very short time?
Mr. DENNISON. Overstocking a single commodity is quite a different
thing from overstocking everything. Going back about 150 years
ago, since the industrial revolution, we have been increasing our production and we have been increasing our consumption. We got into
difficulties when the production of certain commodities increased too
fast. B u t oyer that whole period of time there is sufficient proof that
we can increase production at a certain rate each year and that rate
can go on forever. Red flannel petticoats, of course, have gone out of
fashion, and it would be absurd to continue producing them, for no
matter how few you produced jo\x would be making more than the
market could take. So with individual goods of all sorts, they come
atid go and you can overstock with them. But we haven't yet reached
the point where we can have too much of all commodities. Now, as
a matter of fact, on account of manufacturing efficiency increasing
siiice 1922 and 1923, and the notable increase in the productivity of the
workers, we have fewer men in factories than we had before. A t the
same time we have a greater factory production.
Senator TYSON. Have we more unemployment than we had two or
three years ago?




Senator TYSON. We are consuming now practically not all that we
can manufacture. If we had everybody employed, what would happen then ?
Mr. DENNISON. There might be a period of adjustment that would
have to be allowed for—a short period of adjustment—and then, to
judge from the past, we should be able to consume all we produced*
provided it was not all out of balance as between one kind of goods
and another.
Senator TYSON. DO you think it would be beneficial for unemployment to have shorter hours of labor ?
Mr. DENNISON. That is a temporary matter if it is put in just to
help unemployment. For the long run* I do not think it would help
Senator TYSON. DO you think if you had 60 hours of labor a week
you would increase unemployment?
Mr. DENNISON. At first, if we should work 60 hours a week, I suppose we would increase our output without immediately increasing
proportionately the demand for goods. Then after a period of adjustment we would probably consume all that could be consumed,
Judging by the past. I suppose it is fair to assume that we can look
forward to a 5 or 6 per cent increase in consumption each year without fear of abnormal unemployment.
Senator TYSON. It seems to me what we want to learn is to consume more. If we don't find some method of consuming more it
strikes me that the great thing for people to do is to find some way
for the people to consume more, because we can certainly consume
a great deal more than we are producing now. And if we don't sell
all we produce everyone gets into trouble sooner or later. The pigiron industry is now depressed very badly. The textile business is
very badly depressed. The coal business is very badly depressed.
The woolen business is very badly depressed. Everybody knows that
there is overproduction. Now, then, how are you going to remedy
that—by continuing to produce?
Mr. DENNISON. I S it so accurate to say that there is overproduction
in those lines, or is it overcapacity to produce ?•
Senator TYSON. NO ; if they would only use all the capacity they
could in the cotton business you could produce in 75 per cent of the
normal working time all that the country can produce working
irregularly 100 per cent of the time, but if you had to produce 100 per
cent of the time the whole country would go broke.
Mr. DENNISON. Business men in reaching for their own advantages
make mistakes very often in putting in too much equipment.
Senator TYSON. Then what would become of the people that are
being employed now in factories that operate only temporarily?
Eegular employment everywhere would certainly cause unemployment
for the time being in many lines of industry.
Mr. DENNISON. That would cause unemployment for the time
being, but the workers would have other employment eventually. I
don't think that a reasonab.e percentage of overcapacity is a serious
matter. I think it is probably necessary, because we don't know just
how to adjust our capacity just right. A moderate overcapacity is
a good tonic. People try harder to become efficient because of this
overcapacity. When you come to overproduction, that can't be car



ried on very long, because it means that somebody's stocks of goods,
somebody's merchandise account, must grow very big. I don't think
that is now true in cotton manufacturing.
Overcapacity, if not excessive, is not, in my opinion, a very bad
feature. Sooner or later we come to the point where we have 10 to
15 per cent, perhaps, of overcapacity. I don't think that that is anything more than reasonable insurance, and all that it means is that
the return on capital has to adjust itself. We have to have a little
extra to meet situations that can not be known. In normal situations I don't think overcapacity could be called an evil. Overcapacity
in the coal industry is, however, very serious. Part of the overcapacity in the textile business came out of the war demands, and
then, of course, there is the change of custom in women's dresses.
Women's clothes now take one-fourth of the textile material that they
took a generation ago. There are swings in demand in individual
cases that are simply the result of having to adjust ourselves to
changed conditions—changes in civilization. Those I do not think
we can hope to avoid. When there is a new kind of wheat developed,
as in the Canadian Northwest, it has its effect upon certain farmers in
certain parts of this country. Those are adjustment evils that I do
not think we can avoid.
That brings me to the last point I want to make about our own
company. We realized that we should do everything we could to
stop irregular employment, and that, nevertheless, even at the best
there would still be some unemployment. So we instituted a plan
in 1915 and started a fund for unemployment relief. It has proven
highly successful. The fund has amounted to $150,000, which is used
to take care of our regular employees who are put out of employment
when we have no work for them to do. If laid off because of lack of
work,, we pay them 80 per cent of their pay if they have dependents
and 60 per cent of their pay if they do not have dependents. Eelief
begins within one and one-naif or two days of the time of unemployment. This has been one of the most fruitful things we have done.
The CHAIRMAN. That fund—was that created entirely by your
Mr. DENNISON. Entirely by our organization.
The CHAIRMAN. There wasn't any augmentation of it by the
Mr. DENNISON. ISiot at all.
Senator WALSH. Have you reports in confirmation of the information which shows the extent to which such funds have been developed by other firms?
Doctor LUBIN. We have on our list witnesses representing a half
dozen firms who have done that very thing.
Mr. DENNISON. The great value of this unemployment fund is that
it assures employees that a distinct effort is going to be made to keep
them regularly employed.
The CHAIRMAN. In other words, if there is any lack in managerial
initiative you are penalized out of that fund ?
Mr. DENNISON. Certainly. It is away beyond anything we thought
possible. Executives are strongly impelled to see that something is
done so that we shall not have unemployment. It is a spur to the
elimination of unemployment, just as our mutual fire premiums are



spurs to eliminate the hazard of fire. Our unemployment insurance
is a daily practical reminder that workers are not to be laid off. The
way the thing is working is very astonishing. We pay out not only
for actual lay offs but we pay when we transfer a man or a woman
from one department to another when the rate of. pay in the new
department is not equal to the rate formerly received. This system
is administered by a joint committee of workers and the management.
With a regular pay roll of $75,000 a week we have paid out since
1920 only $75,000. Our worst year was 1021, when we paid out
$25,000. The pay roll was smaller then. What our unemployment
scheme has done is to state definitely that " W e are going to fight
unemployment through the institution of this fund." We guarantee
to pay only to the extent of the fund. I t isn't strictly insurance, for
we don't guarantee to pay for any indefinite time, because we can not
tell what the cost will amount to. We say, " We will pay until the
fund is exhausted."
This has been the best single move we have ever made in our whole
labor-management policies. Other concerns will tell you about the
success of similar measures in their plants. Sometimes the scheme
takes the form of guaranteeing employment. Practically, in our
plant, we work so hard to keep our people on the pay roll that our
scheme is in effect a guarantee of employment. I t is a shock absorber.
Other individual corporations have undertaken similar measures,
and some of us met recently and talked over with each other the problems we have to cope with, and we discussed improvements and
suggested changes.
Senator W A L S H . How many firms were represented in this discussion ?
Mr. DENNISON. Eleven firms.
Senator W A L S H . I n the whole country ?
, Mr. DENNISON. Well, that was all we know about. There may be
Senator TYSON. Were they all in the same kind of business you
are in?
Senator TYSON. Different kinds of
Mr. DENNISON. Different kinds of
Mr. SWEETZEK. Some of them were

the most seasonal in the country. One was a writing-paper firm, another was a clothing firm;
one was cast-iron pipe; another was candy—Schraft's candy—and
another was a diamond cutter in New York, and so on.
Senator W A L S H . Mr. Dennison, if you have finished this one phase
of the discussion, I would like to have your comments upon this
matter: I have been impressed by the large number of letters that
have come to me in recent years from a class of men stating that they
had been denied work or been discharged from their employment ancl
were unable to get new employment because they had reached the age
limit of 50 or more years. That seems to be a growing complaint or
assertion. I would like to have your views on that feature of
Mr. DENNISON. We tried very hard last summer, in a survey cf
100 concerns, to find cases of that sort. While there were a* few
more, perhaps, than there used to be, we couldn't find any evidence
that they were as great as popularly supposed.



I t has always been hard for the man of 55 out of a job. There
has usually been an age limit where a man's fingers stiffened even if
his knowledge of the job got better. On the other hand, the modern
implements that have grown so rapidly do take the places of some
of the older men. But retail selling has increased, and there is there a
demand for the middle-aged. Doctor Lubin has studied that and
can probably give a better answer than I can. I am inclined to
think that it is not a serious problem. However, among the unemployed you would probably find some larger proportion of older
men than you used to.
Senator W A L S H . Has unemployment among the older men increased? When working forces are reduced are the older men discharged first?
Mr. DENNISON. Only a little more than has always been the case.
There has lately been a very strong movement toward more productivity and in manufacturing there is a tendency toward the discharge of the older men whose best working years have passed by.
When we go through the plant as carefully and as earnestly as we
have had to during the past five years, to find every possibility of
eliminating waste, we find men of all ages who have just been doing
one sort of thing or another and we are led to figure what good they
are doing. Jobs of that sort are often eliminated. When we do this
we usually find something for these fellows to do. There has always
been the practice to discharge at a certain age in industry, and it is
probably more than it used to be; but it does not yet seem to me to be
an important problem.
Senator W A L S H . Some of the most pathetic cases have come to my
attention—of men with families, large families.
Mr. DENNISON. I n our own shop in 1905 we wouldn't take a man of
45 if we could get a man at 25. I t is less expensive to break in a man
of 25 than it is a man of 45 whose habits are set, except in a very few
cases where there is a trade knowledge that comes with the increase
of years and which makes up for the lack of physical activity. I
think it is slightly worse than it used to be, but still it is not yet a
problem of major size. Nevertheless, it is very difficult and very
discouraging for the individuals concerned.
Senator W A L S H . D O you know if any of these concerns—and have
you evidence of them—have rules and regulations when they take
on new employees, to instruct their employment agents not to take
on men over 50 ?
Mr. DENNISON. I don't know of any particular case. Among the
100 concerns I am speaking about we didn't have a single case of that
kind. The old story is that if you can hire the younger men to do the
work they become better acquainted with it. Of course, we would
always rather have started them in at 20, every one of them, from top
to bottom.
Senator P H I P P S . H O W many of those cases would have to pass a
physical examination to see how healthy they were—something like
20 per cent ?
Mr. DENNISON. I don't think you would find anything like 20 per
cent, but the practice of physical examination is growing all the time.
Senator W A L S H . In a public forum a Polish priest put this question
to me that I put to you, stating that amongst his parishioners he



found a very growing tendency to discharge men of large families
who reached 50 years of age. H e was a clergyman, working among a
class of people noted for their hardiness and endurance. I was quite
surprised at his insistence upon the importance of that problem and
his fear for the future because of its possible growth.
Mr. DENNISON. He is getting his first dose of it. I t is only in
recent years that people of this character—the immigrant population
from the southeast of Europe—have come into the class of the middle
and old age groups.
Senator W A L S H . And you think that will always happen and increase?
Mr. DENNISON. Slightly. Doctor Lubin has made a study of several hundred individual cases and he knows more about it. So f a r
as we can find we don't believe that it ever was a major problem.
Society has changed its methods and its demands upon the different
members of the family. I n the old days of handicraft the younger
people were left out of the picture in p a r t ; now the younger ones
have to do more of their share of supporting the family.
The CHAIRMAN. I don't want to bore you on this morphine question, but I am very much interested because usually the more we take
of morphine the more we want to take. Don't you think that installment buying will act in this way?
Mr. DENNISON. There are a lot of individuals who would like t a
see more of it so that they might sell more goods.
The CHAIRMAN. S O wThen we wTant another period of great activity, will we take on more morphine? I n other words, the patient
has had a dose of it and liked it, and the doctor comes in to stimulate the situation by giving more morphine in the form of credit.
The patient likes the dose.
Mr. DENNISON. The installment people do.
The CHAIRMAN. Of course, they go back to the credit fund and
make a profit. So does the banker. You can't do business with the
banker without making a profit.
Mr. DENNISON. I am glad to know that.
The CHAIRMAN. YOU knew it before I said it.
Mr. DENNISON. Of course, I knew i t ; but I didn't say it because
I might have my credit curtailed.
Senator TYSON. D O you think that they sell a great many more
automobiles to-day because of the installment plan than they could
possibly sell if they did not have it?
Mr. DENNISON. I think when they started in it they undoubtedly
did, but it is questionable to-day.
Senator TYSON. D O you think a man would buy a car if he had
to pay $700 or $500 clown as quickly as he would if he only had to
pay $50 down?
Mr. DENNISON. N O ; but we must bear in mind that he has committed himself to pay installments on a variety of things.
Senator TYSON. New people are coming into the country every
year. A man has an automobile which is paid for and he wants t a
get a new one. He says, " I wTill turn it in and get a new one on the
installment plan." Do you think that Henry Ford, one of the
greatest business men in the world, would have adopted the installment plan if it wasn't a good thing ?




Mr. DENNISON. I have said that the installment plan was a good
Senator TYSON. Then why not continue it if it is a good thing?
Mr. DENNISON. The evil would be in allowing the system to get
out of control.
Senator TYSON. A man couldn't be carried if he didn't buy things
on the installment plan.
The CHAIRMAN. I think there is a conflict between the Senator and
the witness. I asked whether it was wise to expand the installment
Mr. DENNISON. My guess is that it has reached its limit. Its proportion does not seem to increase and has not increased in the past
two years.
Senator TYSON. T O stop it would be a very bad thing.
Mr. DENNISON. T O stop it would be a very bad thing.
The CHAIRMAN. Doctor Lubin desires to ask a question.
Doctor L U B I N . Mr. Dennison, can you give the committee an
approximate estimate of what proportion of unemployment could
be eliminated by an attack upon this problem of unemployment by
American industry itself?
Mr. DENNISON. All sorts of unemployment, I feel certain—I can't
express it in figures, but the serious part of unemployment could be
conquered by the Government and industry acting wisely. If the
Government and industry should attack this problem in* the right
way, we should be able to cut our unemployment by at least one-half.
Doctor L U B I N . Has your firm found regularization a profitable
venture ?
Mr. DENNISON. We surely have. There isn't anything we are more
sure of, and we would do it again readily. I n recently discussing
with our employees which of our schemes should be given up if it
were ever necessary to make a radical change, the employment guaranty feature was the last one that they wanted to see go, and that
in spite of the fact that they have only received $75,000 from this
fund in the last eight years.
Senator W A L S H . H O W many employees do you have ?
Mr. DENNISON. Three thousand.
Senator W A L S H . H O W many did you have in 1921 ?
Mr. DENNISON. About 2,700.
(Appended is a statement showing the unemployment fund
reserve transactions of the Dennison Manufacturing Co., Framingham, Mass. This table shows the source of the reserve unemployment
fund, and the payments made each vear from the funds, from 1920
to October 31, 1928:)



Co., unemployment

Appropriated from profit and loss:
Dec. 31, 1916
Dee. 31, 1917
Dec. 31. 1918
Dec. 31, 1919
Total appropriated from profit and loss.



.$20,000. 00
35, 000.00
35,000. 00



Interest on fund:
1910-1920, inclusive

$9, C41.28
5, 750.00
4, 806. 00
5, 822.50
5, 760.00

Total accretions
Less payments from f u n d :

$4, 489.97
23, 372.92
1, 510.15
1, 348. 29
2, 084.11
8, 981. 01
20,924. 27
15,465. 27



1928 (10 months)


Total payments


Balance of fund, Oct. 31, 1928


(The following table is an analysis of the payments made from the
unemployment fund reserve of the Dennison Manufacturing Co. It
shows how much was paid out each year for actual lay off, how much
was paid out from the fund to make up the differences in wage rates
which resulted from transfers of labor to new jobs to avoid unemployment, and the percentage which unemployment payments bear to the
total yearly factory pay roll:)

of payments


made from unemployment

Cash paid
for actual
lay oft


in value
of labor
paid on
transfers to
avoid unemployment


Total payments

Per cent of
unemployment payments to
pay roll


111. 80




1923 (10 months)









(Thereupon, at 11.50 o'clock a. m., the committee adjourned until
to-morrow, Wednesday, December 12, 1928, at 10.30 o'clock a. m.)



Washington, D. C.
The committee met, pursuant to adjournment, at 10.30 o'clock
a. m., in the committee room, Senate Office Building, Senator James
Couzens presiding.
Present: Senators Couzens (chairman), Tyson, Walsh, and Locher.
Present also: Dr. Isador Lubin, economist, Institute of Economics
of the Brookings Institution, Washington, D. C , assisting the
The CHAIRMAN. I think we will proceed. We may have some more
of the committee here later on, but they are all busy for the moment.
Will you enter in the record Mr. Lewisohn's connections and
Doctor LUBIN. The reporter has that information, Mr. Chairman.
The CHAIRMAN. Mr. Lewisohn, we will be very glad to have you
tell us what you know about this unemployment situation.
Mr. LEWISOHN. Mr. Chairman, it is my belief that if seasonal unemployment were done away with we could probably save to American business, conservatively, $2,000,000,000 a year. I will explain
the figures later on. Up to recently unemployment has been considered largely a matter of taking care of the unfortunates, the unemployables, and the mendicants. Twenty years ago it was considered
a matter of getting work for tramps, or, as a matter of fact, making
tramps work. Now we realize that it is really a complex problem
of industry, in the broader meaning of that term. Though it isn't
a matter that can be cured solely by industrial executives, unemployment is largely a matter of having our whole industrial organization
work better. And the main point, I think,, to keep in mind in
unemployment, on its preventive side^ is that it can not be approached
directly, but rather as an incident to other problems.
I suppose the trouble was that we used to regard unemployment
as a sort of specific germ disease that could be eradicated by finding
some specific cure, some panacea, some antitoxin. More recently,




since it has been studied more thoroughly, we realize that it really
is a symptom of a lot of complex situations that arise in connection
with other problems. Sometimes it is due to situations that are
the exact opposite of each other, just as a rash can be due to a
healthy condition, like sunburn, or an unhealthy condition, like
hyperacidity. In a similar way anyone connected with business can
see that unemployment is the result, fundamentally, of a healthy
condition of the country, sometimes of an unhealthy condition.
Sometimes it is the price of progress, sometimes it is the price of
decay. For example, we can have unemployment in a country such
as this, in a healthy condition, having healthy growing pains, due
to the introduction of labor-saving devices; and, on the other hand,
we can have unemployment in a community that is economically
decaying. We have had it in States such as Colorado, you wiil
remember, Senator, where we had unemployment due to the fact that
the mines were more or less exhausted in that State. We have unemployment in a country like Austria, or the port of Venice, where the
channels of trade have changed.
Again, we can have unemployment due to opposite conditions,
due to efficient management, and you can have unemployment due to
inefficient management. For example, progressive management is
often under the necessity of introducing labor-saving devices. Take
the mining business, in which I am engaged; very often we find
ourselves under the necessity of mining more efficiently in order to
mine the lower grade ores. Now, that is a sign of efficient management to be able to do that, and yet it may mean that you suddenly
would have to throw out several hundred men on the community.
Now, in the same way we are hearing of the introduction of new
processes in some of the steel plants. I know one in particular that
is run by a friend of mine. They have new processes and they are
under the necessity of discharging 500 men just because of efficient
Now, on the other hand, we have the problem of seasonal unemployment, and that type of unemployment, far from being due to
efficient management, is due usually to inefficient management. Seasonal unemployment, as I suppose some other gentlemen have explained to you, can be met, largely met, by executives who possess
a sufficient amount of ingenuity, Yankee ingenuity, and Yankee
imagination. And thus where we have that type of unemployment
we can say that we have had poor management, whereas in the
other cases it was really the result of good management. I think
the main point to keep in mind, therefore, in all these problems is
that unemployment can not be approached directly, and that it must
be approached as an incident in the solution of other problems.
I am discussing this problem of seasonal unemployment first because it is the one problem tha£ is the most susceptible of a direct,
definite, and immediate attack. Its cure quite often is a by-product
in the process of solving some other problems. It is something that
you can do something concrete about right away—now. If the
business men are conscientious enough about the problem, and if they
attack it with sufficient ingenuity, it always seemed to me to be a
very interesting problem in which there doesn't have to be any conflict between the desire of business men for profits and their social



and humanitarian instincts, for Ave all know that seasonal unemployment is usually a needless waste which cuts down our profits.
I have estimated that probably if we were able to do away with
that type of unemployment Ave could save $2,000,000,000 a year in
profits. We have unemployed, year in and year out, approximately,
let us say, 1,600,000 to 1,700,000 men. We could probably do away
with a million of that unemployment, which would mean that we
would have done awpy Avith about 3 per cent of the unemployment
among those that want work, which number about 35,000,000. I am
just estimating it. Our national income is about $70,000,000,000 a
year, and that would mean that we might save about $2,000,000,000
a year. So here we have the problem which is incidental to the
problem of making larger profits.
Now, I am not going into detail about the seasonal unemployment,
because I am in the mining business, and also, to some extent, as a
by-product, in the acid and fertilizer business, in which we have
practically continuous employment. We have certain seasonal problems that Ave meet in the fertilizer business by the establishment of
proper storage facilities. We make a large part of the acid that is
made in the South and we have found it important to see that we
have enough storage facilities so that we don't have to shut down our
work unduly.
Seasonal unemployment, as the name implies, and as you gentlemen know, is a matter of unemployment due to the yearly seasons.
Winter compels a change in diet, in clothes, and in recreation, and
there are certain industries in which we have the problem of what
electrical engineers call the peak load. We have that in the electriclight business. We have tried to do away with it. The activities of
the particular business or industry are concentrated at one time for
us, and unless something is done about meeting the problem there is
no Avork for the men for the balance of the year.
Of course, we have the farm problem, and many of us who have
farms try to find work for the men to do in the winter, so that we
can keep them employed all through the year. During the President's unemployment conference in 1921 a serious study was made of
the problem and we sent a questionnaire around, and we found a
large number of businesses doing a great deal to meet the problem.
Of course, you are all familiar with the type of man that goes into
the coal business in the winter, and the ice business in the summer.
We haAre seen those in the migrating hotel business who don't employ
their people in the hotel business in Florida during the summer but
take them aAvay to the Berkshires. The business man Avho has given
any thought to the problem begins to realize that there are ingenuities that can be introduced all along the line. Now, for example,
there are, first, ingenuities in distribution. The telephone and telegraph companies cut their prices at certain times. The anthracite
coal companies have done it to some extent. In the automobile business we know that people used to think that they could use cars
only in the summer. Now, with the closed cars, they use them just as
much in the winter, so that we haven't had that seasonal problem to
such an extent there.
Then there is the method of introducing supplementary lines. A
manufacturer of farm and garden implements, for example, may



introduce sleds in order to balance that business so that he can keep
his men at wrork the year round. I t is very much of a problem, and
I am giving these examples merely to illustrate it.
Then there is the problem of manufacturing for stock. You will
probably hear about that further from Mr. Draper. I n my own
experience I have found that it is important to have managers keep
in mind the necessity of providing adequate storage facilities so
as to make it unnecessary to close down the plant just because the
demand for a short time may not be sufficient. I am not going
further into details, because it seems to me that this matter is largely
a matter of emphasis, and those interested in a public way in this
question can best help bring about progress in it by providing
educational means to bring this matter into the consciousness of the
business men. The important thing is to make regularization the
fashionable thing to do. We know that our business men always do
the profitable thing and should use their ingenuity to make regularization fashionable, but they don't.
Necessity is the mother of invention, and in business, it seems to
me, anybody can realize that the important thing is to create a state
of mind among business men so that, if I may use the phrase " regularization first," it becomes t h e . fashionable thing among them to
introduce stability in their plants. I think that once the business
men are alive to the possibilities in this direction we can rely on
their ingenuity to find means of solving the problem. Here we have
a problem that is largely one that business executives can solve.
Then we have the problem of technological unemployment, which
is the price of progress and a real acid test of a healthy condition.
Somebody called my attention to that in 1900. They were complaining of technological unemployment. We heard complaints about
high unemployment due to labor-saving devices during the latter
part of the nineteenth century.
Xow, here it is, in a way, a sacrifice the working man is asked to
make to posterity. There is really no solution of this problem
•except to provide adequate public labor exchanges. Our private
exchanges aren't adequate.
Many of us have felt that we should have adequate Federal and
State unemployment services that cooperate with each other. A n
investigation by the Institute of Economics has shown that American
labor is very adaptable and that it readily jumps from one trade
to another.
The CHAIRMAN. Will they jump from one location to another as
Avell as they will jump from one trade to another?
Mr. LEWISOHN. We have men come down to Tennessee from
Detroit, Senator, down to our plant in Tennessee, and the difficulty
we had was to be quite sure that the men we took from the automobile business were adapted to mining. That is a matter of trade
test. They will come if it is necessary; but, at any rate, I think
we can not ask labor to make all the sacrifices in this problem of
being absorbed into other work, because of the introduction of laborsaving devices. I t seems to me we should at least do everything we
can to help them. Besides, it would be profitable for the country
to do so. There are a lot of complex problems connected with it.
We are further behind in Federal employment exchanges than they



are anywhere else in the world, and this situation seems to me almost
The CHAIRMAN. Isn't that due to the fact that the country is so
large, compared with other countries—European countries ?
Mr. LEWISOHN. I don't know. One of the causes has been, Senator, that we tried to take it up during the war, and set it up too
quickly, without proper administrative study, without proper civilservice concern, and the proper thing in the Federal service, both
State and Federal, is the administration, as it is in all these problems. I t seems to me that the way to solve that problem is to make
sure that we have a well-paid staff at the top to go about it just as
they would a big business. And, indeed, it is a big business.
I suppose doing away with seasonal unemployment by business
men is one of the most important things we can do toward the unemployment situation in the country. It is well that an adequate
appropriation should be made by Congress for the building up of an
efficient staff. The first thing, it seems to me, is an adequately paid
director, which would assure the country that adequate service is
given. There has been a great deal of experience had on the problem
and a very extensive survey made by the Russel Sage Foundation.
I think there is no doubt that we could have an adequate survey made
if anyone was anxious enough to have it. We are very ingenious
when we want a thing hard enough.
I see no reason why we shouldn't have a public employment exchange to promote or accelerate the absorption of the men thrown
out by those of us who are introducing labor-saving devices. I have
known plants where men were thrown out of work in order to make a
success of the operations, and there are no facilities making certain or
making fairly easy their absorption into other industries.
Then, of course, we have got the other problem of cyclical unemployment. I suppose during 1921 the depression caused the country
a loss of $9,000,000,000. That is a guess, but there was a 15 per cent
drop in the national income, which was $60,000,000,000, so that the
loss due to that depression can be estimated at $9,000,000,000. Now,
the individual business man can help in preventing excesses of those
depressive periods by proper forecasting methods. Probably you will
hear from some manufacturers on the subject. By proper forecasting
methods they can prepare for those times by building up adequate
reserves, have their sales force ready, and not too large inventories.
I think in this respect we have improved greatly over 1921, and that
sort of thing adopted by American industry will have its effect on
the buying policy. I think it is a healthy thing. I t may have gone
too far, but I think it is a healthy thing.
By proper forecasting in individual businesses a good deal can be
done to prepare individual businesses to meet a depressive period.
On the other hand, I think it would be an excellent thing if the
Government could lead the way in the direction of meeting the problem of mitigating these depressive periods by reserving a certain
amount of public work for those periods. The great thing, the important thing, about the Government taking the lead in that direction, if they were ready to do a certain amount of construction during
the time when we were threatened with depression, is that it would
instill confidence in the business world; it would make construction
at that time fashionable among other groups, and a gesture of this



character by the Federal Government would stimulate States and
cities to do" likewise. I t wouldn't, of course, prevent depressions,
but it would have a marked influence in mitigating their force. I t
is particularly important also because, I think, it would prevent
too much public work in boom times, which is just :as important, by
cutting out public work in boom times. I t would also be important
in helping prevent subsequent depressions. So that, all in all, it
seems to me that public works, if we are ingenious enough, could be
a balancing force to flatten out the force of these waves of overaccentuated prosperity and successive depressive periods.
The CHAIRMAN. YOU spoke a while ago about setting up a reserve
during prosperous times. Did you mean that to be used exclusively
for the promotion of your own industry, or were those reserves anticipated to be used in a way to balance the income of the workers?
Mr. LEWTSOHN. N O ; I wasn't going into the problem of unemployment compensation, which is a large problem, and almost a separate
one in itself. I think that is a very healthy thing, but the most important thing, it seems to me, is to have the reserves so that you don't
have unemployment. I think the healthiest thing, first, is the approach of unemployment as a problem that comes incidental to a
lack of forethought in business.
The CHAIRMAN. Yes; but Mr. Dennison, in testifying yesterday,
stated that they had created a fund during a period of eight years,
and I think the maximum amount of the fund was some $75,000, and
that that was to be used anytime they were required to lay off men.
I n other words, they penalized themselves for having to lay off any
of the help; and that in itself, of course, was naturally an incentive
for not laying them off but keeping them in continuous employment.
If I remember correctly he said they had only paid out one week's
pay roll in all that period of time—eight years.
Mr. LEWISOHN. I think it would be an excellent thing if we could
get employees to do that in a larger way. I was interested to know
that one large insurance company—the Metropolitan Life—is ready
to insure companies against unemployment.
Senator W A L S H . What you mean by adequate reserves, then, is
reserve business, rather than any fund, as Senator Couzens speaks of?
Mr. LEWISOHN. That is what I mean.
Senator W A L S H . YOU mean that each employer should keep in
reserve some business that he could bring forward and develop in
times of depression, is that it ?
Mr. LEWISOHN. Well, also that he should have funds in his treasury
so that just at the time of depression he wouldn't be broke and have
to shut down because of lack of working capital to pay his workmen.
I t quite often happens.
Senator W A L S H . In times of boom, if they have adequate resources,
so that they can carry on in times of depression for restoration of the
business. In other words, they could accumulate a stock on hand, in
reserve. That is your thought ?
Mr. LEWISOHN. Financial resources.
Senator W A L S H . And by these resources they could carry on their
business at a temporary loss in anticipation of the reserve prosperity.
Mr. LEWISOHN. Yes. As a matter of fact, I think it has become
more the custom among the larger companies to have much larger



reserves than has ever been the case before in the history of this
country. We all do. They used to rely very much more upon bank
loans. Now, they build up fairly large reserves. I think that is a
very healthy tendency because it provides the possibility of manufacturing for stock during depressive periods.
The CHAIRMAN. Have you given any study or thought to unemployment insurance yourself?
Mr. LEWISOHN. I have given just a little thought to it. I don't
think it is a problem that the American people are ready to handle in
a public way yet. I am interested, however, to find that some of
the larger insurance companies, at least one as I said—the Metropolitan Life—is ready, if it can get legislation to amend its charter, to
insure companies that desire to pay a premium in order to pay unemployment bonuses in case their men are discharged because of lack of
work, or perhaps thrown out for other reasons. This would be very
useful, it seems to me, in times of depression when men are thrown
out of work, because it would sustain the buying power of the public
just at a time you want to sustain the buying power.
I know that insurance companies are writing billions of dollars
worth of group life insurance. I am a director in the Equitable Life.
I known it is billions these insurance companies write. I t has only
been built up in the comparatively last few years. I t might be very
useful to know that insurance companies would write group unemployment insurance, because it would be a balancing force in such a
period. And also it would mitigate the horrors of unemployment
for at least a fraction of the workers. I don't believe that all the
companies would be willing to insure on that basis. My opinion, if
you asked my opinion, would be that ultimately, far off perhaps, it
is to be very carefully considered. We will have to get some method
for State unemployment insurance, but that may be many, many
years from now.
Senator WALSH. Have you made a study of what has been done in
that direction in other countries ?
Mr. LEWISOHN. I have studied some of the literature on the subject.
Senator W A L S H . YOU stated a while ago that your company had a
relatively small unemployment problem, that you were giving the
workers practically continuous work.
Senator W A L S H . That refers to
Mr. LEWISOHN. T O our copper

the copper industry?
business and to the acid business

and fertilizer business.
Senator W A L S H . H a s that been generally true of the copper business throughout the country?
Mr. LEWISOHN. I think the metal mining industry is usually pretty
Senator W A L S H . H O W has it been with you the last few years in
.the copper business?
Mr. LEWISOHN. I t has been fairly stable—year in and year out, of
course. Of course, copper is something that can be sold continuously. The small mines, let us say, are shut down and those men are
thrown out of work.
Senator WALSH. YOU mean they all carry the same number of
employees, year in and year out?



Mr. LEWISOHN. Yes; practically. They may take on a few more
or a few less.
Senator W A L S H . We read so much in the financial papers about
the copper business being dull, about copper not being mined, that
you would naturally infer that there are periods of rise and fall in
M r / LEWISOHN. Of course, all the copper isn't mined in this
country. Some copper is mined in Chile, South America.
Senator LOCHER. Wasn't there a tremendous slump immediately
after the war ?
Mr. LEWISOHN. Immediately after the war, yes. I t threw a lot of
men out of work.
The CHAIRMAN. Where are your copper mines ?
Mr. LEWTISOHN. Arizona and Tennessee.
The CHAIRMAN. Are they producing at a lower cost than other
copper mines in the country ?
Mr. LEWTSOHN. N O ; they are what we call medium cost.
The CHAIRMAN. I was under the impression there was unemployment in the copper mines in Michigan.
Mr. LEWISOHN. Of course a lot of men are thrown out of work in
Michigan because of competition. That means a .shutting down of
the mines because the cost is too high for the producers. I don't
see how you could prevent it. We use, in the manufacture of fertilizer, large gangs of men, and we have introduced traveling cranes,
and we provide adequate storage facilities, and have less /seasonal
unemployment because the men employed in that work are employed
the year round.
Now, you have men thrown out of work just because you have
improved your process. Federal employment offices seem to me to
be necessary because men thrown out of work should be absorbed
in other industries just at that time. I n the mining industry we find
at times we have to discharge a certain number of men in order to
make the mines profitable. Or, again, take the industry, as I said,
in Colorado, or in other States, where we have mines that have
become exhausted, and, as a result, the men have to find other work.
They have to be absorbed. So we have a certain amount of unemployment that can't be done away with, so there we have this problem
of reabsorbing them into other businesses. I t seems to me, particularly in seasonal unemployment, among business men it i^ largely a
matter of making the business men conscious of the necessity of
stability in their business, and that we ought to have a regularization
movement. I really think you can get pretty far with that.
The CHAIRMAN. You would have no difficulty in arousing their
conscience if they were the sufferers the same as the men out of
Mr. LEWISOHN. I think they are the sufferers, without being conscious of it.
The CHAIRMAN. But not in the sense that the worker suffers in
not being able to provide adequate support for his family.
Mr. LEWISOHN. But they lose their profits.
The CHAIRMAN. YOU can lose your profits without sacrificing your
home life; but it is different with the worker out of employment



going through a period of that kind. His suffering is physical as
well as mental.
Mr. LEWISOHN. I am speaking of unemployment that occurs during the year in almost every industry. That may be done away
with if the business men were ready to emphasize the problem sufficiently. I agree with you that it is very important, indeed, from
the humanitarian point of view that you just mentioned, and I believe that it can be very largely mitigated at least if you could get
the business men to become sufficiently interested.
The CHAIRMAN. I think that is all. Thank you very much for
The CHAIRMAN. Please give your name and occupation.
Mr. DRAPER. My name is Ernest G. Draper. I am treasurer and
general manager of the Hills Bros. Co., New York.
The CHAIRMAN. W h a t is their business?
Mr. DRAPER. Packers of food products.
The CHAIRMAN. H O W extensive is their business ?
Mr. DRAPER. We do business amounting to seven or eight million
dollars a year, in many countries of the world.
Senator W A L S H . H O W many employees have you?
Mr. DRAPER. We have about 1,000 employees.
Senator W A L S H . Doing what kind of work?
Mr. DRAPER. Packing; food products, principally Dromedary
dates. We have a packing station in Basrah, Mesopotamia, at the
head of the Persian Gulf. The crop of dates that matures in September is packed in 70-pound boxes and then transported by steamer
to a factory in Brooklyn, N. Y. There the dates are unpacked,
cleaned, and sterilized and replaced in small cartons, in which form
they are sold to the trade. Because of the nature of the crop it is
inevitable that the raw material for a whole year's production must
arrive at the Brooklyn factory from Mesopotamia between the
months of October and January of each year.
As the greatest demand for dates is from September to January,
it was customary in the old days to pack in a small way during the
first part of the year and then to concentrate upon high-speed production during the last four months. This meant that the average
working force during the first eight months of the year had to be
expanded by about 600 per cent during the last four months. The
wrench involved in expanding this force over night, so to speak, is
apparent. For years the company struggled to keep up with the
demand for its product, which became so insistent in the fall. I n
trying to meet this demand there was the temptation to lower the
quality of packing and in other ways to encourage wasteful methods
which are bound to creep in under forced-draft production.
Finally conditions became so critical that the executives determined upon a drastic change in policy. Their chemists told them
that if, upon arrival, raw material was placed in cold storage until
taken out to be packed, was packed in cartons and then replaced in



cold storage, it would keep indefinitely, providing the proper temperatures to be maintained were determined beforehand. Accordingly, the company erected a cold-storage warehouse adjoining its
packing plant. It purchased raw material which would supply not
only the fall demand but the following year's demand as well. In
1921 the new plan was tried, but only in an experimental way. The
experiment proved successful. Dates packed in January were taken
out of cold storage in September and found to be in perfect condition.
In the following year of 1922 a much larger quantity was packed
during the off season and for the first time in six years the supply
of Dromedary Dates during the fall rush season was equal to the
demand. After this successful experience the company awoke to a
realization of the great savings which could be effected by attacking
the problem from a production standpoint. In the past, practically
no attention has been paid to the kind of labor employed or its effectiveness during employment. The best way to meet such a situation
was to establish a personnel department. This the company did, and
procured the services of a college woman who had had some experience with department store employees.
One of the first needs which became apparent was that of additional lines during the off season for dates. The company has consistently tried to meet this problem by promoting several off-season
products. While our success in this direction has not been spectacular, a glance at the records indicates that it has been considerable.
It takes time to work out problems of this character, but that they
can be worked out, now that we have a definite formula for more
regular production, goes without saying.
We are staunch advocates of budgetary control. At the beginning
of each year we budget every item of importance, whether it refers
to sales, purchasing, or production, and then we try to rigidly keep
within this budget. This method has eliminated waste to a remarkable degree and has undoubtedly increased our profits.
The facts will show that more stabilized production has brought
about a higher quality of product, a more continuous working period
for employees, and a general increase in smoothness of operation
throughout all branches of the company. Our attitude toward broken
employment has changed. We never decide upon a major shift in
production without considering what this change will mean to our
employees. This is not a sentimental attitude alone. It is an attitude
that bears fruit in better morale and more profitable operation. To
this extent it may be called a selfish attitude. It may be selfish, but
at least it is enlightened selfishness which has regard for the social
welfare as well as for the individual gain.
The reason I took the time, Mr. Chairman, to make that detailed
statement of this company's successful efforts to stabilize employment was that so many business men seem to think that stabilization
of employment is more or less a charitable affair; that it is good for
society. But we aren't in business for charity; we are in business to
make profits; and it seemed to me that by giving an example, an
example of a comparatively small company, to be sure, but one that
has tried to regularize its production and has succeeded, we can
show that it not only is desirable from the standpoint of society but
that it is also desirable from the standpoint of individual gain.



The CHAIRMAN. After you adopted that method, what was the
difference in the roll, the emplojonent of your men?
Mr. DRAPER. Our employment in the old days was about 200 employees for the first eight months of the year, then about 1,300 or
1,400 employees for the last four months. Our production is now on
the basis of between 800 and 900 employees through the year. I n
other words, as I have already stated, instead of expanding overnight
almost our number of employees about 600 per cent, we now work
regularly between 800 and 1,000 employees right through the year.
The CHAIRMAN. Do you still expand some during those four
Mr. DRAPER. Yes; we have to expand some or contract some, depending on the amount of business that we get in. We will say, for
instance, we expect to sell a certain number of cases of our product—
we hope we will sell it, and that is based on a very careful forecast—
of course, it fluctuates somewhat.
I have here a book entitled " The Regularization of Employment,"
and if it is in order I would like to give a copy of this book to each
member of the committee, because it seems to me it contains a great
deal of valuable information along the line of our discussion here.
This chart indicates the time of our production and the number of
our employees. This line indicates the volume of our sales and this
line our production in the old days [referring to page 54 of said
book]. Now, here are the sales, and this was our production, taken
from our actual records. That was for the year 1921-22, but it has
remained approximately the same.
The CHAIRMAN. When was that book written?
Mr. DRAPER. I t was written in 1924.

The CHAIRMAN. Have you any idea of any legislation that might
be undertaken which would be helpful?
Mr. DRAPER. I am not so enthusiastic about any definite legislation
because I think that this, to some extent—in fact, to a great extent—
is a problem for the business men themselves. I agree with Mr.
Lewisohn that a great deal could be done by bolstering up the Federal
employment service. I t seems to me that industry ought to be glad
to get its employees easier and quicker, and this I believe would also
be of tremendous value to the employee himself.
Senator W A L S H . I shall appreciate your sending me a copy of this
book, and I am sure the rest of the committee would like to have
cop <- Will you mail them to us?
Mi I >RAPER. I wrill mail them to you; yes, sir.
The CHAIRMAN. Have you any information as to what became of
those employees that you used the last four months of the year during
the other eight months?
Mr. DRAPER. We haven't any definite information, but we do know
that they were absorbed to some extent by the factories of the American Can Co., which were in our neighborhood, and by other plants
somewhere near there, but we also know that a great many of them
didn't get any employment at all and undoubtedly suffered as the
result of this drastic swing.
I should also like to say in answer to your question as to whether
I think any legislation would be desirable in this connection, that I



am very much in favor of the public works idea which has been
expressed here for us.
Senator W A L S H . The Jones bill?
Mr. DRAPER. The Jones bill, and others of that type, yes; because I
think anything of that sort which will help smooth out the curve,
this cyclical curve, or seasonal curve, is desirable. Mr. Lewisohn, I
think, was supposed to spend more time on the cycles of industry,
and that is why I am not attempting to say anything about that phase
of the problem. I am more interested, more anxious, to present the
view that the business men are, in my humble opinion, losing money
by not making employment more regular. I believe, as I have
already stated, such a plan benefits society and increases profits.
The CHAIRMAN. Did you read the proposal of the governors' conference at New Orleans? That proposal was supposed to be authorized by President-elect Hoover.



The CHAIRMAN. Did that appear to you to be a practicable plan?
Mr. DRAPER. S O far as I can see it was more or less the putting into
effect of some of the major stipulations of the Jones bill. I am not
familiar with all details of it, but it seems to me that that was more
or less
Doctor LUBIN (interrupting). I t doesn't bring in the question of
the various States.
Mr. DRAPER. Yes; I think that is perfectly true. This is a problem
that everybody has got to get behind. I t can not be merely a
Senator WALSH (interposing). Of the National Government without the State government.
Mr. DRAPER (continuing). That isn't supported by the rest of the
communities. The States, cities, and towns must all do their share.
Senator W A L S H . Have you made any study or given any thought to
unemployment insurance?
Mr. DRAPER. I have, yes, sir; but I agree with Mr. Lewisohn that
state unemployment insurance seems perhaps a little far in the distant future. I n any event, it seems to me that it is more or less
academic until we make production in our plants more regular. I t is
perfectly ridiculous to talk about giving insurance to individual
employees—unemployment insurance—until you regularize your employment, because if you do it without making your employment
regular you are liable to burst the company—break the company.
Senator W A L S H . W h y have business men been so slow, if I am
correct in saying they have been so slow, in realizing if they don't
regularize their production they are losing profits ?
"Mr. DRAPER. A S I said before, business men jseem to think of this
as humanitarian, so to speak, something you do in a paternalistic
way, and not anything that really affects the pocket. If they were
going to make more money in undertaking these things they would
be very quick in doing it, but I think business men are really to a
great degree conservative minded, and they naturally don't like to
engage in anything that looks like an experiment to them.
The CHAIRMAN. The general adoption of workmen's compensation
due to accidents and other causes was brought about by the social
demand for it, the demand of the people.
Mr. DRAPER. Yes; I think that is absolutely so, Senator.



The CHAIRMAN. YOU don't find any employers now opposed seriously to workmen's compensation, do you?

in the final analysis, unemployment is just
as serious for the workmen's families as workmen's compensation.
Mr. DRAPER. I think more so. I 'think the impetus came from the
people themselves. I think, also, that what brought them around
to it was the fact that they realized that they had to take good care
of their employees or their morale would suffer; and good morale
means good production, and good production means good goods.
So that any problem of that sort, it seems to me, can be looked upon
as enlightened selfishness, if you wish to call it that, or intelligence,
because it means increased profits.
The CHAIRMAN. Perhaps the most effective wav of accomplishing
this stabilization of employment is to create a puolic demand for it;
is that correct ?
Mr. DRAPER. Yes; I am ready to agree with tl^at, yes, sir, absolutely ; because I think a great many business men will not study the
problem unle,ss they are iorced to do so. I think that has been the
history in other cases. Along that line I have a memorandum here
which gives exactly that point of view. May I be permitted to read




is a brief memorandum [reading] :

1. Most intelligent persons will agree that the present mass production
methods of American industry are sound and should be further developed.
2. One of the most important factors in such development is the economic
well-being of the individual consumer.
3. The continued success of large-scale production, of quick turnover, and
of installment buying hinges upon steady employment for the individual.
4. A man out of work is a drag upon his family, upon his community, and
upon industry itself, which might have won him as a consumer if he had been
working and therefore able to buy in normal volume.
5. Unemployment then is not only harmful from a social point of view. It
is wasteful from a business point of view.
6. While endless discussion upon the problem of unemployment has taken
place in the last 50 years, and various associations and periodicals have
attempted to deal with certain aspects of it, no adequate machinery has ever
been set up to attack the problem in an organized, nation-wide way. The
field is practically virgin territory.
7. If several of the largest and most influential corporations of the country
would cooperate to investigate and strive to cure this evil, they could do more
in 5 years than a drifting policy could accomplish in 25 years.
8. The hazard of broken employment is intrinsically no more difficult to deal
with than the hazard of industrial accidents. These have been reduced to
manageable size since 1910 by safety engineering, workers* education, factory
inspection, and the like.
9. The time for industry to help in solving the problem by regularizing its
production and, in other ways, adopting far-seeing methods of production, is
when the country is prosperous as at present instead of later when conditions
may have changed. The time to .act is now.

I have attempted to give there the viewpoint that we have been
discussing, that workers are consumers as well as producers, and to
increase the purchasing power of consumers is desirable not only
for the worker himself but for industry and society as a whole.
Senator TYSON. I would like to ask Mr. Draper if he thinks it is
possible to devise a method by which there could be unemployment




Mr. DRAPER. I think ultimately such a plan would be very desirable, but until you get your production more or less regularized it
would be a very difficult thing, it seems to me, to embark upon
compulsory State unemployment insurance. If we turn on and off
the current of employment, as one automobile manufacturer possibly
might do, we would be forced to pay such premiums that it would
be disastrous. If, however, that manufacturer or any other would first
regularize his production it would be a very feasible thing and a very
easy thing, it seems to me, for him to take out unemployment
insurance, or be forced to take out unemployment insurance.
Senator TYSON. Wouldn't it be better for unemployment purposes
to take it out, the same as a man buys his own insurance for sick benefit? The reason the workmen's compensation laws have become
general was that the manufacturer or person responsible for a
worker's injury were compelled by law to compensate him. They
were compelled to pay him. If he got hurt in your factory or mine
through no fault jon his part in the course of his employment, the
jury was compelled to give him a verdict. But the verdicts were so
irregular. I think the main reason we have the workmen's compensation laws so generally now was because the verdicts were so
irregular. The compensation laws are so much better and more
regular and uniform.
Senator W A L S H . The witness illustrated by his own business the
successful results he has had by stabilizing his own production. H e
argues that the first thing to do is to educate the producer to the
importance of stabilizing production, before we consider insurance.
Isn't that it?
Mr. DRAPER. That is my view of it.
Senator TYSON. Of the two, the buyer and the producer, the
buyer is more responsible than the producer because the buyer will
always buy if the producer will produce.
The CHAIRMAN. I don't agree with the Senator on that. I n the
early days of the motor-car industry, when we sold only open cars, we
had to lay off thousands and thousands of men in the winter when
the weather got cold. Of course, since closed cars have come into
such general use, production and employment have become regular.
Don't you think that the American business man, with the creative
mind, by using his imagination and ingenuity, could regularize production so that there would be very little seasonal employment?
Mr. DRAPER. That is my view, absolutely.
Senator TYSON. I think something has got to be done about it.
The CHAIRMAN. The witness testified that they stabilized their
business by providing enough storage facilities to take care of their
goods until the market Avas ready for them.
Senator TYSON. YOU can pile up certain things. I n the automobile
business you can not pile up automobiles. You can put coal in
storage and it will go the year round. You can pile up with some
commodities and can't with others.
The CHAIRMAN. Does the witness have any more suggestions to
offer the committee, or does Senator Tyson want to ask any questions?
Senator TYSON. YOU don't have any seasonal unemployment in the*
food-packing industry, do you?



Mr. DRAPER. Oh, yes. Practically 80 per cent of our dates are
sold in the fall.
Senator TYSON. D O they eat them in the fall ?
Mr. DRAPER. Yes; they eat them in the fall.
Senator TYSON. They don't eat them the year round?
Mr. DRAPER. There is a great peak that takes place in the early
fall and winter; then it falls off.
Senator TYSON. That is, so far as the selling of your product is
concerned; but don't people eat dates the year round ?
Mr. DRAPER. N O . Take the month of August, you will find it
rather unsatisfactory because it is pretty heavy food in hot weather,
and people don't seem to desire it.
Senator TYSON. H O W did you manage to stabilize your business.
Don't you get the buyers to take the dates the year round ?
Mr. DRAPER. N O ; we couldn't do very much with the buyers because the product won't keep very well. We put the product in a
cold-storage warehouse and keep it scientifically.
Senator TYSON. I n other words, you pile it up ?
Mr. DRAPER. Yes, sir.
Senator TYSON. NOW,

dates are a staple article of food. They
don't change in flavor or appearance. But if you manufactured
something different, something that people had to have days before,
you would find it a different proposition ?
Mr. DRAPER. Oh, yes. As Senator Couzens intimated, it is a question of leadership in this matter of manufacturing for stock. Another man has another proposition, but he will answer it equally
effectively if he applies his business acumen.
Senator TYSON. Those who have staple articles that don't change
the year round, I can see how they can do i t ; but you take the man
who is making a variety of things, he doesn't have as much chance.
But there are a great many who manufacture what you call staples,
and to that extent it would help employment.
The CHAIRMAN. If there are no further questions, the committee
will adjourn until to-morrow morning at 10.30 o'clock.
(Whereupon, at 12 o'clock noon, the committee adjourned until
to-morrow, Thursday, December 13, 1928, at 10.30 o'clock a. m.)



Washington, D. C.
The committee met, pursuant to adjournment, at 10.30 o'clock a. m.,
in the committee room, Senate Office Building, Senator James
Couzens presiding.
Present: Senators Couzens (chairman), Tyson, and Walsh.
Also present: Dr. Isador Lubin, economist, Institute of Economics
of the Brookings Institution, Washington, D. C , assisting the committee.
The CHAIRMAN. The committee will please come to order.
Mr. Hapgood, we would be glad to have you tell us what your*
experience has been and of your interest in the resolution on unemployment pending before the committee. Tell us in your own way.
Mr. HAPGOOD. Might I tell you in the beginning that I had my first
experience in the canning business of the Franklin, Crane Co., wholesale grocers, in Chicago. Shortly after I began my employment
with them they put me in charge of a small food-manufacturing
plant in connection with the grocery business. I remained with them
until 1903, when I went down to Indianapolis, and, with my father,
took a controlling interest in a food plant there, called the Mullen,
Blackledge Co., which was changed at that time to the Columbia
Conserve Co. I became president of the company; am still with
it, and it is still operating under that name.
In the beginning it manufactured a small line of food products—
catsup, pork and beans, and some country products. The business
was highly seasonal, as most food-packing establishments are. In
March, 191.7, wre took the first steps in the change toward regularization of employment. At that time about 5 per cent of our workers
were on what we call "salary," which meant that they were paid
by the week and retained indefinitely, pending good behavior. The
balance were on " wages," which with us generally meant payment by
the hour, and only for the hours worked, with no protection. But
in March, 1917, partly with the consent of my brother Norman, and
partly independent of him, I thought that the time had arrived when
we ought to make as the first principle of our business the abolition




of irregular employment. U p to that time my purpose had been
that instead of stressing for regularity of employment we should
follow the practice usually followed in the industry—to stress for
the lowest possible pay roll.
During several years preceding 1917 my philosophy still was that
the stress of our establishment at least snould be not toward reducing the pay roll whenever that could be done without affecting our
establishment or sales. I t should rather be toward the contrary
direction—stressed toward retaining people to the very limit of our
ability. So we made a radical change in our philosophy and in
1917 we took off the wage basis and put on the salary basis a considerable portion of our employees. I can't remember what the percentage was, but I am quite sure that it would at that time have
increased the proportion the salary people bore to the wage people
from 20 to 140. I won't follow the details of the steps taken in that
respect in the succeeding years, but will bring you down immediately
to date. Iri this present year, in the first eight months of the year,
97 per cent of our workers were on salary, and 3 per cent on wages,
as against 10 years ago, when 5 per cent were on salary, and 95 per
cent on wages.
The CHAIRMAN. NOW, when you say they are on salary, does that
mean continuous employment throughout the year ?
Mr. HAPGOOD. Yes; continuous employment throughout the year,
quite irrespective of exigencies, such as retrogression of business or
sales inactivity.
Now, I want to make this exception, that we have a peak load during the month of September, a very tremendous peak load, when we
handle tomato products during a period of six weeks sufficient to last
us 12 months. And when I speak of a change in the situation this
year, the first six months of this year, by which 97 per cent were on
salary, and 3 per cent on wages, I am not speaking of the three
weeks during the peak load this year. I will give you those figures—
I have them down here somewhere. I n 1917 we had 5 people on
salary, as opposed to 90 people on wages, during the first eight
months of the year. I n 1928 we had 97 people on salary during the
first eight months, and 3 people on wages.
The CHAIRMAN. I n other words, your total number of employees
was 100.
Mr. HAPGOOD. Yes; during what we call our regular period, which
means 12 months in the year, less six weeks during the peak load.
W h a t 1 am trying to make clear to you now is the relation between
the two peaks as far as salaried people compared with wage workers
are concerned.
I n 1916, at which time our turnover was about as it has been this
year, but caused largely by the war situation, when we "entered the
peak, or when we were in the peak, rather, we had 5 salaried
workers—the same number as when we began the year, and had a
total force of 150 workers. I n other words, a total of 145 workers
on wages. The fall peak just past, we had 97 salaried workers
during the peak and 130 altogether.
Now, to repeat that, considering the two situations, the fairly
normal though variable Joad that occurs during 46 weeks in the year,
before the planning began we had 5 protected workers, 50 not; to



date, 97 protected workers, 3 not; until we entered the peak. I n
1916 we had 5 protected workers, 147 not. I am trying to make clear
to you the two situations with which we are dealing—one a 46-week
period, the other a 6-week period. I am trying to explain that by
saying that in the canning business we handle a highly perishable
commodity during our extreme peak.
The CHAIRMAN. H a s this change in the conditions made any difference in relation to your earnings?
Mr. HAPGOOD. Our earnings have been very much greater since
1917 than before. As a matter of fact, preceding 1916 our business
was extremejy uncertain as to its earnings. Beginning with 1917
our earnings jumped up. Following—I can't say definitely on account of this change in plan—our earnings increased, and only once
during the decade following did we not make a satisfactory profit.
I n 1921 we lost very heavily, but that was due to a swollen inventory. You remember about it—certainly about what happened then.
We went into 1921 with a very heavy food inventory, when prices
dropped off, and we lost about 25 per cent of our capital stock. We
got most of it back in 1922. Even in that period in 1921, when this
system that I speak of had been in operation for four years, we
didn't release any of our protected workers.
The CHAIRMAN. Of that increase in profits, dr at least the satisfactory profits since that time, have you any idea what percentage is
attributable to an increase in business and what is attributable to
more efficiency in stabilization of employment?
Mr. HAPGOOD. Not very much was attributable to increase in business. Some would be attributable to increase in business—I don't
remember the percentage—but as much as 25 per cent in 1917 as compared to 1916. Following 1917 we had years in which our turnover
was not any greater than in 1916, and we made a good deal more
money. I n other years, as in 1925, for example, with a business not
as great as 1917, we made a great deal more money.
Now, in the year in which we are now, we seem to have struck a
new situation with regard to sales progress and our earnings these
next 12 months—the next 6 months, including the last 6, are going
to be altogether the largest we have had.
Senator TYSON. What is the name of your company?
Mr. HAPGOOD. Columbia Conserve Co. Would youcare to have me
go on, Senator?
The CHAIRMAN. Yes; I would be very glad to have you go on.
Mr. HAPGOOD. Because of this protective feature there isn't any
question in my mind as to the effect upon the morale of our employees.
Senator TYSON. W h a t protective feature are you speaking of ?
Mr. HAPGOOD. Full-time employment. We don't speak of it as
unemployment, but rather as employment.
Our aim the last 10 years has been to protect our workers by the
year. Most of our workers now are on salary, by which we mean that
the individual worker gets his weekly income, irrespective of any
difficulties that may arise, not only inactivity of business, but sickness on his p a r t ; and there is no subtraction made from the total
number of our workers from any cause whatever.
Senator TYSON. W h a t business are you in?
Mr. HAPGOOD. The food-canning business, of which the chief item
is canned soup. I t is highly seasonal.



I repeat that our effort has been in a measure successful to place
everyone within the protected list after he has served with us six or
eight months, after we have come to the conclusion that he is a satisfactory worker. Then we put him on our salaried list, which means
what I just said. W e will not then discharge him because of inactivity of business. We will carry him through any depression that
comes. We did that in 1921, when business was very much depressed
and had a very heavy loss.
Now, I said before you came in, Senator Tyson, that in 1921, having followed this policy to a considerable measure for four years,
beginning in 1917, we recouped in 1922 almost all our losses of 1921,
of $75,000, which losses were occasioned in large measure, if not
almost entirely, by depreciation of the inventory. My conclusion,
although this is an imponderable thing, why we recouped in 1922 our
losses of 1921, was because of the morale we built up in our organization. There were really other protective features that entered into
it, such as I have testified, in relation to sickness. We at that time
took the position that I just described, that even in case of illness
no person on salary would have his salary cut.
Senator TYSON. D O you have insurance against that ?
Mr. HAPGOOD. N O ; all these charges are made directly against the
pay roll. We haven't built up any insurance fund to take care of
that. We haven't thought it necessary. I still doubt the necessity of
it. The time may come when we feel it is advisable to take care of
periods of depression, but we went through the most serious depression the food business has been in in 1921 and carried through (without a reserve). I t is true we lost money heavily then, but most of
it we lost because of the depreciated inventory and not because of
carrying people not active on
Senator TYSON (interrupting). How do you manage to determine
whether or not a man is sick enough not to work? Do you have him
examined, or do you just take his own statement?
Mr. HAPGOOD. If any one employee feels that a man is simulating
illness he will bring his thoughts or belief before the governing body,
which consists now almost entirely of the workers, but we have very
little deception, I think. They have come in when they were not in
condition to work, although they know that they won't be penalized,
so far as their income is concerned. They are just playing the game
a little different way than an ordinary person would play it.
Senator TYSON. H O W many employees do you have?
Mr. HAPGOOD. We have now about 140 employees. The number is
growing quite rapidly now, as our business is growing. Our main
economic problem has not been keeping our workers, it has been with
our sales—breaking through. I think one of the most difficult pieces
of business any concern in the United States has met with has been
that which we have had to meet with our competitor, the Campbell
Soup Co. I don't know of any concern that more completely dominates the market than the Campbell Soup Co. does to-day, and this
dominance is due to an enormous advertising campaign. Three
years ago I think the advertising records show that he spent more
money than any company in the United States on advertising. This
situation has been an extremely difficult one for us to meet. We
seem now to be breaking through the hypnotism caused by this enor



mous advertising campaign, and, consequently, our business grew
over 50 per cent this last 6 months, tand we figure that in the next
decade we will have perhaps a thousand employees. The assumption is that our sales will be adequately large enough to make that
possible. L think it is possible, in fact, probable, that this will come
to pass mainly because of the effect on our employees of the various
measures we put into being looking toward their protection during
periods of adversity over which they have no control, and also because of stimulating their intelligence.
The CHAIRMAN. Have you any knowledge of the Campbell Soup
Co.'s employment policy?
Mr. HAPGOOD. Only in a general way. I think its main policy is
that used by most canners, or in most businesses—keeping the pay
roll as low as possible, rather than as large as possible. Our business has shown 150 per cent increase, and instead of stressing the
lowest possible pay roll, we stress the highest possible pay roll.
Senator WALSH. D O you work by piece, or do you work on salary?
Mr. HAPGOOD. Our employees work on salary. We don't work by
piece, evfen with our wageworkers, not protected.
Three years ago we decided to guarantee our wageworkers 50
hours a week.
The CHAIRMAN. W h a t is the regular time that you do work? I s
that your regular time—50 hours a week ?
Mr. HAPGOOD. N O , our regular time is 9 hours a day, 5 days a
There was some hesitation about it at first, but the good effect of
the results of the first 4 months upon our employees was so satisfactory that we decided to continue guaranteeing our wageworkers
50 hours a week.
The CHAIRMAN. YOU say 5 days a week, 9 hours a day?



The CHAIRMAN. Does a worker get the same pay for 5 days that he
gets for 6 days?
Mr. HAPGOOD. Yes. He gets the same pay anyway, Senator.
We are now admitting the new worker into the general protective
system—to the same protection. We are now guaranteeing a worker
50 hours a week.
I t is customary with us when a local holiday comes on Tuesday or
Thursday, to shut down on Monday or Friday. But when that happens not only salary workers get their full pay, but the wageworkers
gets the full 50 hours.
Senator TYSON. W h y do you give 50 hours when they only
work 45 ?
Mr. HAPGOOD. When we reduced the length of the week for the
salaried worker we said we will not pay any wage worker for less
than 50 hours a week, irrespective of what he works during the day,
unless he just loafs. Now, the time may come when we will raise
our wage rate and then be on the basis of 45 hours.
Senator TYSON. YOU think it is a good thing, then, to reduce the
hours, do you?
Mr. HAPGOOD. Very much so.
Senator TYSON. What effect would a reduction in hours have,
taking it by and large, on unemployment? Suppose the country



went on an 8-hour day in all manufacturing plants, what effect
would that have on unemployment ?
Mr. HAPGOOD. That is too difficult a question for me to answer.
I will say this: That if the workers' morale were affected, as ours
has been affected, by reduction in hours, a short time after the
reduction was made it might not increase the output any, and if it
didn't increase the output, then I don't think that it would increase
unemployment any.
Senator TYSON. If it didn't increase the output?
Mr. HAPGOOD. If it didn't increase the output.
Senator TYSON. YOU think the decreased output would decrease
employment, do you?
Mr. HAPGOOD. Because of the lesser number of hours. I t seems to
me that the output of commodities generally throughout the country
would decrease by the decreased number of hours. Then, obviously,
in order to hold the present output of commodities we would have to
increase the number of workers.
Senator TYSON. Exactly.
Mr. HAPGOOD. NOW, what I am trying to say is that the decrease
in our hours doesn't necessarily decrease the output.
Senator TYSON. But that would not be true where you had a
machine, and that machine were to produce a certain number of
pounds. If you lose hours, you lose production, because a machine
has a certain fixed production for a given time.
Mr. HAPGOOD. NOW, Senator Couzens, you have asked me some
questions in your letter: " H o w irregular was employment in your
plants before you attempted to stabilize it ? " and " By what means
did you undertake to provide steady employment ? "
Kather naturally when we assumed this responsibility for fulltime payment to our employees, or the major number of them, we
cast about for new methods of keeping ourselves busy, not by pounding sand into rat holes, so to speak. One of them was a change in
policy, doing important repair and clean-up work, which we had
done before during periods of activity, and throwing that kind of
work into periods of the valley load. There have been times during
the last 10 years when the plant has been shut down and all the
employees have been used to clean up shop—painting, doing various
repair work, and so on. You may be interested to know that at times
we have turned some of our more active and younger women into
painters, painting walls of the building. They may not be very good
painters, but they are perfectly satisfactory for work on the interior
of the building. If you were in our shop, you would see 10 good
mechanics not working in the machine shop at all, but working in the
kitchen labor room, working at work not as completely adapted to
them, such as running a lathe or doing mechanical work, but fitting
in when'the machine department wasn't active. Almost all of our
employees are trained to do more than one job. We haven't been
training our women into good mechanics yet, but we have been training our men so that they can do a large variety of work.
The CHAIRMAN. Some of the witnesses we have had here testified
that they had, in an effort to secure regularization of employment,
thought of new things to do in the way of manufacturing merchandise which would offset the peak of the seasonal business.



Mr. HAPGOOD. We have done that. I will come to that in a
I have spoken of the training of our employees to do more than
one kind of work—repair work, clean-up work, and so on. Our
valley load always occurs sometime around about the month of
June—and we entered this system in 1917—and June came about,
we then changed our vacation program. Before that time only the
major employees were given vacations on pay. The others took
vacations, or lay offs, rather, at their own cost. In 1917 we began a
new system by giving no less than one weeks' vacation to every
salaried employee. That was gradually extended until 1921, when
we got into the depression, we extended our vacation period to three
weeks, and in some instances to four. Now, that is one way of filling
up the valley for manual workers. I have filled it in tne past by
going out and playing golf. We have carried it through now to
every salaried employee. During the month of June, sometimes
overlapping into the month of July, the whole valley load go on
vacations, except a few people, and those few go on vacation later.
That isn't the usual way of the ordinary business man. That leads
me to say this—that our approach, or our consideration of the average worker in our business is now the same as it is of the exceptional
worker in its various protective features.
Senator TYSON. Mr. Hapgood, it seems that good workers, as a
rule, have jobs anyway. I t is the man who is more or less shiftless
and not as steady as others that you have to look to. You happen
to select your people with good care. They would get jobs anyway.
As I see this, there are still a great many people in this country going
from pillar to post that are, perhaps, not very healthy, not very
strong, that lose their jobs. They are the ones that are laid off. Of
course, your plant is comparatively small. You can select them
with care. What we have to do is to find some means of taking care
of these people who have to be helped, the ones that need help the
most. They have got to be helped. I would like to ask you a few
Have you any idea what could be done to reduce this general unemployment? Is there any way of having insurance against unemployment, like insurance against sickness, for instance, or something like
that? It seems to me if something of that kind were worked out,
where a man paid insurance against his own unemployment, in the
long run he would insure it if it could be done. Because in that way
he would be penalizing himself by paying insurance premiums for
himself when he could not be employed. Like the workmen's compensation, they don't give a man as much as he would get by actual
employment or working, but it keeps him always spurred up with the
idea of getting well and getting back to the point where he could
make his full wage.
Mr. HAPGOOD. NOW, Senator, you covered several points there. I
will answer them in order. One was the question if I did not think
that capable employees may at all times, or possibly at all times, be
Senator TYSON. Not at all times, but generally.
Mr. HAPGOOD. Approximately at all times. That unemployment,
therefore, falls mostly upon the least-fitted people. I want to tell



you my experience in our own business. You are not correct in your
surmise that the success of our business has been because we have been
very careful in the selection iof our employees. As a matter of fact,
the canning business up to date, and certainly with us up to a few
years ago, employed as poor a class of labor as any business in the
country, and the reason, for that was that the business was so highly
seasonal. In 1917 we didn't make any selections out of the plant.
We have hired them at the door since 1916, paying them as weekly
workers. They were more or less the flotsam and jetsam of the .city
of Indianapolis. We put them on as weekly workers. We have
made selections and taken the best from that flotsam and jetsam, yes;
but at no time during this entire experience, now drawing toward the
close of the twelfth year, have we gone out in the open market or
advertised so as to bring us exceptional employees. We have some
college men and women who would like to come into our plant for
social reasons. We have taken several of these people into our organization, particularly persons who have a psychological interest in the
problem of human relations. In my judgment, we have been dealing
with a class of worker^ lower in average education than most other
I will make a comparison with the coal industry. I t happens I
know the coal industry through my son Powers. Since he graduated
from Harvard in 1921, through his experience and training as a coal
miner, as an actual coal miner, actually digging coal himself, I have
come in contact with coal miners. I came in contact with coal
miners in the strike of 1922 in Somerset County, where he was active
as a trade-unionist. It is my firm belief that these coal men averaged much higher in intelligence than most of our people in 1917.
Many of them are active to-day. We have some coal miners in our
employ to-day. We have taken four from the coal fields of Pennsylvania during the last several years, paid their expenses to Indianapolis, and transported their families there, putting them on the pay
roll. I am free to admit that these four miners are better than the
average coal miner, and far better than the people whom we could
get to-day.
No; it is not my belief—I repeat that the success, whatever success we have achieved in affecting the morale of our employees and
the prosperity of our business, has not been caused by the selection
of employees; it was caused by the system. I don't mean to go so
far as to say that the difference in the system will change the morale
of a moron into a person who is as good as the ordinary worker.
I do mean to say this—given a normal man, not the man made abnormal by adversities from childhood on, but a normal man, under the
system we have devised, we will make an unusual worker of him. We
haven't gone outside for technicians during the whole period. When
this plan went into effect in 1917 we had two technicians in our
business. Every technician in our business since has been trained in
the rank and file inside of our business. But our balance sheet will
show, in my judgment, large advantages because of the environment.
I can't help but agree in one direction you are correct, that unemployment tends to fall upon the least capable people.
Senator TYSON. That is it.



Mr. HAPGOOD. But what makes these people? What is the factor
that contributes mostly to the lack of ability of the worker? I t is
unemployment. I t is because of unemployment, almost chronic unemployment, that there are several million people in the United
States who do not get work, and whose morale is deeply affected by
that fact itself. I t is constantly occurring in my experience in our
own plant, as I study the situation. I repeat, the effect of unemployment upon a very ordinary group of people is demoralizing. I
was the only person in the employ of the business with a college
education. We had one person only who had gone through high
school. The average of our employees in 1917 was less than the
fourth grade. Now, in spite of that, or coincident with it, we went
ahead with this system. Our organization, small, fairly well known
nationally, has as its end the making of profits, but it is attempting
to cope with the factors in industrial life which affect the life of our
citizens. I repeat that it is my belief that one of the chief causes
of a poor workman is irregular employment.
Senator TYSON. I n other words, the mere fact that he is continuously unemployed accentuates his weakness.
Mr. HAPGOOD. Sure.
Senator TYSON. And makes him a less efficient worker.
Senator TYSON. I n

other words, if a man shows the slightest weakness or incompetency, irregular employment accentuates that ahd
makes him worse and worse.
Mr. HAPGOOD. Exactly.

Senator TYSON. If industry would encourage him to improve instead of laying him off, that wouldn't be accentuated. I think you
are right about that. At the same time you have to admit that you
would have to take away some that are not efficient. W h a t we have
to do is to get something for those to do who are out of employment.
The CHAIRMAN. I didn't understand that he did throw some out
of employment.
Mr. HAPGOOD. I said this, we didn't put any of the original group
out because they were inefficient. But as we have gone through, and
added to our force, we have gone through the selective process, not a
very selective process, but in a group of 45 or 40 applicants for jobs,
o u t o f those we selected a half dozen, possibly 10 or 15. That is to a
degree a selective process, not a highly selective process, to be sure.
If we had gone through an altogether more selective process than
that, and brought in workers from other industries who were well
trained and fitted, then this experience of ours wouldn't have been as
convincing to me.
Senator TYSON. I understand that. I agree with you that your
good treatment of your employees in making their interests your own
has been due to your good management, but at the same time we have
a lot of people unemployed. What I want to know is if you have any
remedy to suggest as to what we are going to do with these people
who are unemployed for whatever reasons.
Mr. HAPGOOD. I am glad to attempt to answer that. Senator
Couzens, in your letter you have asked me, " T o what extent can
similar measures be applied to other plants and other industries ? "



I t is my belief that if a small canning plant like the Columbia
Conserve Co. can successfully protect its employees, or most of them,
and remain in business, that there are thousands of other plants that
can do the same thing. This is a mere guess, nothing more than a
guess on my part—that if some of the big industries in the country
were to take the position that their chief reason for being in business
was regularity of employment, full-time employment, rather than
for some other reason—if they kept their employees the way we keep
ours, then the number of unemployed would be vastly reduced.
Now, it is obvious that there are hundreds of small plants that can't
very much affect the unemployment situation by the plans we put into
effect, but I repeat, that if we can do it, a weak company, I can't
see why the United States Steel Corporation can't do it, or automobile companies can't do it. I n the matter of size we are insignificant, dealing in a business of highly seasonal products. I n spite of
those two things, we have carried out this plan with profit to ourselves and have benefited the workers.
Senator W A L S H . I understand that in 1921 you had poor business,
but in the interest of your employees you kept your plant running,
manufactured goods just the same, and took a chance on losing.
Mr. HAPGOOD. During that depression we did not manufacture
goods, but we used the employees for other purposes—repair work,
clean-up work, vacations, and reduced the number of hours from a
60-hour week down to a 50-hour week. We did various things to
keep them active, but we didn't have them actually producing goods.
Senator W A L S H . Did you give them a 50-hour week at the 60-hour
Mr. HAPGOOD. The same man gets the same pay whether he works
10 hours a week or nothing at all. We make no reduction whatever
in the major portion of our force for any purpose except for bad
conduct; except in the group meeting when the committee decides
that some person should be penalized. That never happens.
Senator W A L S H . During this period of 1921 I understand you continued your pay roll just as if you were passing through a prosperous
Mr. HAPGOOD. Yes; we did that. We have done that ever since we
started in on this plan in 1917. T h a t kind of system has returned
in some measure the equivalent on the part of the employees.
Senator TYSON. I n other words, he has been willing to do all he
can for you when he got the opportunity ?


Now, beginning two years ago, we had reached the point in our
dvelopment where we could begin more closely to foretell the trend
of our sales. Then we undertook what they usually call " stabilization." Now, instead of working almost directly on orders we will
anticipate our August business in January, and when we get into the
next month we will not only manufacture food products for sale
during the immediate days following, but we will also begin manufacturing a surplus to take care of our August requirements.
Senator TYSON. I n other words, you will pile up during the time
your orders aren't heavy, to take care of the time coming, and so on ?
Senator TYSON. I n

that way you will reduce the cost in the long
run so that you can sell at a low price?



Mr. HAPGOOD. Our cost is coming down because we anticipate the
orders and pile up, as you say, and because of the efficiency of our
Senator TYSON. YOU haven't answered my question about insurance.
Mr. HAPGOOD. We don't carry insurance.
Senator TYSON. Wouldn't it be a good idea to have unemployment
insurance which the employees themselves carry?
The CHAIRMAN. In other words, penalize the employee for the
incompetency of the manager?
Senator TYSON. Not at all. There are many people, and we haven't
gotten to the point where we can consume all that you can manufacture if you were manufacturing efficiently.
The CHAIRMAN. But isn't it up to the initiative of the industry,
the captains of industry, to stabilize this thing, because of the natural
weakness of the employees in doing anything in an organization way?
In other words, with the motor car business, when they were building
only open cars, the cars could only be operated in hot weather, and the
employees were laid off all winter because of the fact that they
didn't have the ability or imagination to build closed cars. Then the
employee must be the sufferer and lay out of work all winter because
we didn't try to stabilize the business.
Senator TYSON. Mr. Chairman, I agree with you we ought to do
everything we can to stabilize the business that way, but even if you
have every plant in the country doing its best to stabilize you will
still have unemployment. My idea is to agree with you that we
should do that, but then I think you will still have a large amount
of unemployment, because, according to Mr. Hapgood's own statement, you have got to produce more and take care of what you produce, or you can't continue to run. Now, my idea is if you had
something like insurance against unemployment, which the employee
himself pays, just like he would pay for his health insurance, because
every employee has to pay for his health insurance, every employee
has got to pay for his life insurance, it would be an incentive to keep
an employee on the job. If everybody would do as Mr. Hapgood is
doing, I think you would have a lot of good employees, but it is
possible you will make every employee a good one, and I hope you do,
but at the same time I think a large number of people would still be
shiftless and inefficient, and ought to have some help. There ought
to be some method, some plan, whereby they wouldn't be in a starving process, where they ought to have one-third, or one-fourth, or
something to keep them going until they got a job.
Mr. HAPGOOD. My experience is that you don't make people efficient
by imposing a penalty on them.
Senator TYSON. I see no penalty in a man paying insurance premiums against unemployment.
Mr. HAPGOOD. Society ought to undertake to employ every man
who is out of employment. A man that has no voice in the management of the business is certainly not responsible for his unemployment. I will admit for the purpose of our discussion here I don't
want to try to consider the man who doesn't want to work, and certainly the educational problem with respect to him is difficult. I



feel I am not capable of handling it. My experience does give me
some competency in discussing who is responsible for the major unemployment, and I think it is society at large.
Therefore, feeling that way about it, while I agree with you that,
for a time, at any rate, I would prefer that each establishment
take upon itself its own insurance, in order to stimulate or accelerate
the time when all employees who want employment will be protected, I don't believe in having the employee contribute. I think
the burden should be placed squarely upon the employer, and those
who feel they must employ workers for a period of a few weeks, or
a few months, should pay a tax for such people, and thus encourage
employers in all parts of the country to reduce unemployment to a
Now, so far as we are concerned, we would very cheerfully pay a
tax to the State or Federal Government for those people whom we
employ only a few weeks in the year. Why shouldn't we ?
(Senator TYSON. For everyone you have in your plant; that is
all right. But there are people coming on all the time—a million
population coming into this country every year, either by natural
growth or by immigration. If there are not enough plants to take
care of all the people who want employment, who is going to employ
those who can't get a job? Assuming that you are taking care of
150 people, suppose somebody wants to get a job at your plant, 50
or more at some other plant, who is going to take care of them?
Mr. HAPGOOD. It seems to me that we have to take care of them—
take care almost of indefinite millions that may come both by birth
and by immigration. What we need to solve is the problem of
bringing about the development of a system by means of which
those who wish to consume goods may be permitted to consume them,
and by means of which people can secure the income with which to
consume the commodity.
Senator TYSON. That is the point. I realize all that; but I
haven't seen any way we can fix it so that we can get it. If every
lant in the country were to continue to give employment to everyody that can produce, we would soon get to the point where we
should have more goods than we could sell, and I think there would
be three or four million people out of employment. We have to
have shorter hours. If we are to keep taking people into our industry and keep them employed, we shall have to employ them for
shorter periods each day.
Senator WALSH. We have overproduction now.
Senator TYSON. We have overproduction now. Due to efficient
management. If we employed all the people, available production
would be so much greater than it now is that there would be a glut
on the market in every line of endeavor. My idea is to see if we can
take care of this surplus unemployment that we now have. Some
people don't agree with me, but I believe if we had 70 hours of work
a week2 as we had several generations ago, and people worked every
day, with the present modern machinery we would have 10,000,000
out of work instead of 4,000,000, because with the machine process
individuals have become much more efficient than they ever were




But I think that is one theory. I think that is a fine idea to try
to get every management to find some ways of taking care of their
own people, of keeping them constantly employed. But even with
that, in my opinion, we will have large unemployment still, because
there are no jobs to be had.
The CHAIRMAN. The great problem, as I understand it, at the
time this resolution was introduced in the Senate, was the number
of men who were laid off. We had two different problems: (1) The
man who might be seeking his first job, and (2) this problem of laying off a man who has already got a job. I absolutely agree with
Mr. Hapgood that the worker should not be in a position of having
to worry about being laid off. If we can do anything to try to
prevent people being laid off because of the cycles in business, we
should do so.
Senator TYSON. But the man out of employment is just as badly off
as the man who has a temporary job. The man I am interested in is
the poor man who can't get a job. Now, you take England, why,
when a man is born in .England his parents begin to think where he
is going to get a job. " W h e r e are you going to find a place to
put him? " And from the time he is born until placed on a job
when he i^ about 18 or 20 years of age it is a matter of concern and
anxiety to his parents. That is the position we are going to be in
in this country. With the growing efficiency of the people themselves, and the efficiency of the machine, it seems to me that unless
we get much greater consumption capacity, we are going to have
increased unemployment. That is the problem as I see it, more,
even, than the one you are speaking of.
Mr. HAPGOOD. I n the main, isn't the lack of consumptive power due
to the lack of income, and isn't the lack of income due to lack of
employment ?
Senator TYSON. That is true. I see what you are doing. I am
not trying to antagonize your position. I think you are only one
Mr. HAPGOOD (interrupting). I think 1 agree with you there.
Senator TYSON. W h a t I am trying to do is to see if you have any
suggestion as to how to take care of the additional evils we are up
Mr. HAPGOOD. I agree with you in the direction of what we want
to accomplish. We might not entirely agree with regard to the
method. I suggest that we put into effect a method by which the
employer would be penalized for short-time work on the part of his
employees. That would then cause him to do, in a measure, at any
rate, what we have done voluntarily. We have forced ourselves to
do it, of what I might be pleased to call a social interest.
Uj) to date our social conscience hasn't been effective in industrial
relations, and may not be effective for several years to come. If
that isn't very effective, I suggest that the employee not be penalized
for something over which he has no control, but the concern itself,
the employer, pay a tax penalty to the State. How much that will
benefit, I don't know. I t is obvious that if you charge the employer
a considerable penalty for giving hi£ employees steady employment
for 10 weeks instead of six months, he will do his best to see to it
that his workers are steadily employed for six months.




Senator TYSON. YOU mean that as a penalty to be imposed under
the law ?
Mr. HAPGOOD. A tax upon him. 1 am not talking now about the
legality of it. I am not the one to give birth to that one idea; I
think John R. Common^ gave birth to it in the State of Wisconsin.
The CHAIRMAN. I remember in the fall of 1920 that there were
175,000 men laid off almost overnight in Detroit. While there was
no law to penalize the employers who laid off these men, the employers were nevertheless penalized because we immediately spent
$3,000,000 to take care of the unemployed, and that $3,000,000 was
paid for by the taxpayers.
Mr. HAPGOOD. We are doing it in a less desirable form.
Senator TYSON. You couldn't get anything of that kind through
Congre^. When you come to that you are just running up against
a proposition that is simply absurd.
Mr. HAPGOOD. Senator, didn't we get through many State legislatures a penalty for accidents, through insurance?
Senator TYSON. That is all right. That was due to the employer's
fault in not having proper safeguards about his machinery. That
ha,s been the law for 50 years. If an employer is responsible for an
injury to an employee he ought to pay for it.
Mr. HAPGOOD. But isn't an employer equally responsible for lack of
employment ?
Senator TYSON. Not something which he can not overcome.
Mr. HAPGOOD. Years ago. when compensation was not discussed,
we said, " I can't help it if a man falls into a machine." Society
came in and said, " If you can't help it, we have to pay the cost."
Senator TYSON. But people will have to go out oi business, and
there will be less employment than even before. I t is a wholly
impracticable business.
Mr. HAPGOOD. Aren't a lot of people being forced out of business
because of the great expense of accidents ?
Senator TYSON. N O ; not very many. A man may have to shut
down his plant because he may go broke if you penalize him for not
giving regular employment. I t is very hard to make money as it is.
If an employer is to be penalized when he can't afford to keep his
workers employed, he will soon be out of business.
Mr. HAPGOOD. Senator Couzens says business does pay for it in
the long run.
Senator TYSON. That particular plant doesn't have to pay it all.
There is a difference between that. A company can pay almost
anything, but individuals can't.
Mr. HAPGOOD. A group of individuals who are taxed to pay for
social responsibilities
Senator TYSON (interrupting). I t is just like an insurance company. You can have many people die and everybody in the United
States helps to pay the insurance policies, but if you "had a few men
pay it you couldn't afford it.
The CHAIRMAN. I don't think that your analogy is a correct one.
There are about 250,000 income-tax payers in the United States out
of 120,000,000 people. I don't assume that the money that goes to pay
for the maintenance of the unemployed comes entirety out of the income -tax payers of the United States. Some of the money paid out by



these taxpayers is gotten back through industry. T h a t is the medium
through which it passes. They aren't really all taxpayers. The fact
that the Santa F e pays hundreds of thousands of dollars in taxes
doesn't mean that the Santa F e Railroad stockholders pay this
amount. I t is, in fact, paid by the consumers of the service rendered by the railroad. As a matter of fact, that money comes back.
Everybody pays, whether they pay it directly or indirectly. However, Mr. Hapgood, we are not the witnesses.
Senator W A L S H . Have you given any consideration or study or
thought to the old-age aspect of the unemployment question?
Mr. HAPGOOD. Yes; a good deal. I am heartily in accord with any
legislation that will pay old-age pensions.
Senator W A L S H . D O you think that phase of it—the discharging
of old employees by employers—can be reached by an extension of
the workmen's compensation laws?
Mr. HAPGOOD. I am not posted as a lawyer. I don't know what
legal obstacles can be found, but it seems to me that we must protect
a superannuated worker whether we consider him superannuated at
the age of 50 or 60 years. We must protect him the balance of his
life. We have an old-age pension in our organization now.
The CHAIRMAN. What is the age limit ?
Mr. HAPGOOD. N O age at all. If in the judgment of the group an
individual is considered no longer physically fit for wprk, we no
longer ask him to work. We believe in keeping them employed if
they want to work, if physically capable, even if they work only a
few hours a day.
Now, to be specific about this, I have two cases in mind: One of
them had been with us 10 years—a dozen years, I think. Finally he
was moved from one place to another, but his income was not decreased when he became unimportant—he couldn't even be a janitor.
We paid his compensation u p to the amount he got on salary—up to
that amount. Whether we pay him the full amount depends on what
outside income he has—whether he needs it. To make that clear: A
single man had been getting $24 a week from us. H e became unable
to work. H e had an income of about $800 on his investment in our
private stock. The company asked him what he wanted—whether he
wanted us to contribute to his support as long as he lived, and he
said " N o . " We were satisfied. He finally said $8 a week, and we
are now paying him $8 a week.
Now, one of our subforewomen, who was getting $24 a week, became completely incapacitated. We approached her. She had more
responsibilities; she was married; her husband was dead. She said
she needed it all, and we paid her $24 a week for the past 13 months,
and we will continue paying her $24 a week for the next 13 years
if she lives that long rather than let her go broke. This is an interesting development in her case. Two or three months after she
went home two doctors, one my own family physician who is now
more or less regularly employed by the company, said she couldn't
live long, probably not over a few weeks. For the last 11 months
he had expected her to die almost any time. Lately she has improved. Now she can walk outdoors. Now, the interesting thing
about her is what would have happened if we hadn't supported her?
I n my judgment, she would have been dead, for she would have had



to worry with no income. Now, if our system has been the cause,
not of prolongation of her life in m ; sery, if she is going to recover
and have several years of fairly happy life and, in addition, if she
happens to be an unusual woman, she can bring influences on her
grandchildren which are beneficial to society. That was how much
our $24 a week for 60 weeks contributed to the welfare of society.
I t is an imponderable thing. I t has some definite effect upon
morale and social welfare. I t has an feffect upon her spirit, and the
people with whom she comes in contact, and it has its beneficial
effect upon these people not only as human beings but also as producing units.
Now, I am saying this because I want to get before you as clearly as
I can the processes through which my mind has gone and the various
things I have attempted to do. I disclaim—I don't want anybody
to think I am doing this for what are usually called religious reasons. I am trying to approach the whole situation in our plant, to
see what the effect upon the individual may be of different kinds
of treatment with respect to his intellectual ability, his intelligence,
and his happiness. The three factors in industry which seem to me
to be important, and in the order of their importance, perhaps, are
his economic ability, his happiness, and his intelligence.
Now, it is my firm belief, based on an experience of almost 12
years, that by bringing into industry surety of employment we
can improve the worker's economic position. We can certainly affect
very greatly his intelligence, and we can through both of those
vastly affect his happiness.
Now, history to date, it seems to me, has aimed chiefly at the first
factor—the output of the individual, his economic importance—and
has paid little attention to what seems to me to be the major factor y
his happiness, whatever may affect his spirits, which I think means
his happiness.
Senator W A L S H . I think the interest of many manufacturers has
been largely based on the desire to increase the output—self-interest
rather than on a spirit of altruism.
Mr. HAPGOOD. Yes; I think almost entirely so. I think there is
a changed attitude, however. I am very much encouraged by what
I have experienced in the last few years with other manufacturers.
The CHAIRMAN. The Senate will convene in a very few minutes.
Have you anything further ?
Mr. HAPGOOD. Now, as to the last question in Senator Couzens's
letter: " T o what extent can similar measures be applied to other
plants and other industries ? " I see no reason why what we have
done can not be applied to all industries, and I believe it will
strengthen rather than weaken the security of industry. I t won't
prevent unstable and badly managed industry from going out of
business, but I think it will increase in the course of years the intelligence of the workers. There is greater difficulty with respect to some
workers than others.
I own a farm of 650 acres, in addition to being manager of the
plant, and I am trying with the farm on the same basis to see if
I can't give security of employment to the major portion, if not all,
of the farm workers. I t is because of my feeling that they should
also be protected we should very considerably change the methods



on the farm. We now have five families on the farm, and all those
workers are protected by the year, paid by the year, and employed
by the year.
Now, there are obviously some kinds of work, out-of-door work,
like road building, that can not be a 12-months occupation. I t is
my belief that when people are in work like that they should be
protected by some form of insurance that will support them when
th^r are going from one job to another, or that the individual State
or the Nation should take upon itself the task of finding jobs and
transporting these workers to other fields. If we ask harvest hands
to go from one part of the country to another, we should protect
them, because they are rendering a definite social service by going
from Indiana, say, to Nebraska, to harvest wheat.
Senator TYSON. Who did you say you should put that on—the
State or the Nation ?
Mr. HAPGOOD. I can't tell you that, Senator. I t is something which
society should provide for.
Senator TYSON. But you wouldn't think it should be put on the
corporation or individual who employs him?
Mr. HAPGOOD. I think in that case it shouldn't be put on the individual farmer. When we get large units like the Campbell people,
for example, they will be able to bear i t ; I would be willing to put
that amount of tariff on my farm.
Senator TYSON. I don't mean you, but the contractor, doing road
building. He contracts for eight months in the year while doing
road building. Would you put it on him during the other four
Mr. HAPGOOD. I t certainly isn't in my mind that a penalty be
paid by industry unless it can give yearly employment. Begin
with little people and say that any employment for less than a
couple of months be subject to some kind of a penalty.
Senator TYSON. Where he could absorb it, perhaps, without ruin?
Mr. HAPGOOD. H e would transfer it by means of additional cost.
The CHAIRMAN. If there is nothing further we will adjourn until
to-morrow morning at 10.30 o'clock.
(Whereupon, at 12 o'clock noon, the committee adjourned until
to-morrow, Friday, December 14, 1928, at 10.30 o'clock a. m.)



Washington, D. 0.
The committee met, pursuant to adjournment, at 10.30 o'clock a. m.,
in the committee room, Senate Office Building, Senator James
Couzens presiding.
Present: Senators Couzens (chairman) and'Walsh.
Present also: Dr. Isador Lubin, economist, of the Institute of Economics of the Brookings Institution, Washington, D. C.
The CHAIRMAN. The committee will come to order.
The CHAIRMAN. YOU are familiar with the resolution which the
Senate passed, No. 219, sufficiently to go into this question of unemployment, are you?
Mr. GREEN. Yes; I know something about it. I understand its
aims and purposes.
The CHAIRMAN. YOU understand^ of course, that this question of
unemployment is a very live issue?
Mr. GREEN. Yes j we understand that.
The CHAIRMAN. And, in view of that, I would be very glad if you
would tell us of any views you have in connection with the solution
and stabilization of employment.
Mr. GREEN. The laboring men and women realize, of course, that
unemployment is a very serious problem. Unemployment affects
labor very seriously; and, as a result, we have given very great consideration to the problem and its solution. I think every thinking
man realizes that it is a very difficult problem, and that i t it is ever
partially solved that it will have to be approached in a careful and
scientific way. There are several phases of the problem that command consideration. First, there is unemployment caused by some
national depression. As a rule, that is pretty widespread. Then
there is unemployment caused by seasonal fluctuations or unusual
seasonal demands for labor, and then, of course, there is a recession.
Now, we have a modern industrial problem, unemployment problem, caused to some extent by machine displacement. A n unfortunate
feature of the unemployment problem is, in my opinion, a lack of
statistical data and figures showing the continual extent of unem




ployment. That makes it quite difficult for us to consider the problem in the way it should be considered.
The CHAIRMAN. Will you just amplify that, because my observations have been that we have accumulated a lot of statistics t h a t
are very rarely available until there has been a lot of suffering from
Mr. GREEN. That is it. The statistics that we ought to have in
order to approach the consideration of this problem of unemployment are not available at the time when we need them. I t was very
difficult during this past year for us to find out accurately the extent
of the widespread unemployment.
The CHAIRMAN. Well, now, let us assume that the statistics had
been available to you; what could you have done about it ?
Mr. GREEN. Nothing of any moment, but it is necessary for us to
have the facts for us to approach the problem in that broad and
constructive way that we ought to in order for us to consider it in
its full effect and full meaning. T h a t is my idea.
The CHAIRMAN. YOU mean, for the next unemployment period ?
Mr. GREEN. Yes. I don't think that we can wait until an unemployment situation is upon us and then expect to solve it overnight. The whole unemployment problem is bigger than that, it is
larger than that, and for that reason we need to consider it and
approach it in a bigger and more constructive way. That is my own
opinion of it, Senator.
The CHAIRMAN. Well, I think that is true. I was not criticizing
what you were saying, but I have a very definite conviction that
too much stress is laid upon statistics, and that the libraries and
the offices of the Federal Government are full of statistics t h a t are
never used.
Mr. GREEN. Not unemployment statistics.
The CHAIRMAN. N O ; that may be true, but it is usually so late,
because of the routine and red tape involved, and the bureaucracy,
that you might, for instance, take the statistics of any period on
any subject and they nearly always have to be brought up to date,
and about the time they are brought up to date the crisis has passed,
and the statistics became old and valueless again. I t seems to me
t h a t it is more a question of consciousness of the employer and the
public generally, whether we have 4,000,000 or 2,000,000 unemployed.
I n other words, we get into controversies, as we did in the last
session of Congress, as to unemployment. No, I don't think that that
was as important as the fact that there was unemployment, and the
problem must be solved.
Mr. GREEN. I n that respect, first of all, we don't know how many
men are being displaced through the introduction of machinery.
The CHAIRMAN. Well, now, if you knew that, what would you do ?
Mr. GREEN. I think if we knew that then we could formulate
some constructive and systematic plan by which we could place
these men that have been displaced through the introduction of
machinery with those who are needing men in a better way than we
do now. As it is now a man is displaced and it is up to him to go
out and find employment in some other line; and, usually, the man
displaced is a skilled man. For instance, in the glass-blowing industry, that trade has been practically eliminated so far as the individual



glass blower is concerned. The young man went into the trade as
an apprentice. Along comes the machine, and it is introduced and
does the work that probably 20, 30, or 40 men formerly did. Now,
those skilled glass blowers are thrown out. They must find employment then in some other industry, usually a new industry. They are
absorbed somewhere. Our experience has been that it is very difficult for those men to make the contact that they should in order to
find employment.
Now, the same is true of men employed in other lines of industry.
That takes place in the steel mills, foundries, blast furnaces, and all
these classes of industry. F o r instance, in the steel mills, work
that was done by 14 men, charging furnaces, is now done by 2.
Twelve men were displaced.
The CHAIRMAN. Well, now, just let us get down to concrete cases.
F o r example, suppose you had statistics to show that there were 500
or 1,000 of those men, what difference does it make whether there
are 500 or 1.000? If there are some, isn't the problem just as concrete? So far as being a problem, the problem is just as concrete,
whether there are 10 or 100 men unemployed. I t is just as concrete
to them as would be a larger number.
Mr. GREEN. Oh, yes; except that you could take care of 10 men
more easily than you could 100 men.
The CHAIRMAN. If you could take care of 10 men why couldn't you
take care of 100?
Mr. GREEN. Well, I suppose, from the standpoint, of course, that
it would be easier to place 10 men than it would be to place 100 men.
That is the point of view, although the problem doesn't differ any
the less.
The CHAIRMAN. That i,s what I mean.
Mr. GREEN. I t is a matter of taking care of the men displaced by
The CHAIRMAN. That is what I mean. If there were machinery
for taking care of 10 men, that machinery ought to take care of 100.
Mr. GREEN. Exactly.

The CHAIRMAN. That is the reason I don't get the importance of
stressing the number.
Mr. GREEN. We would know the number that were gradually
being displaced by the machinery, and the actual information is
always helpful in arriving at a conclusion. That is the point.
The CHAIRMAN. YOU think, then, that if we had statistics showing
10,000 instead of 10 men, the public conscience would be more easily
aroused in solving the problem ?
Mr. GREEN. That is it. We would know that we would have to take
care of 10,000 men, and we could begin setting up machinery by
which we could meet that situation. That is the point I had in
mind. Of course, any seasonal fluctuations which cause a heavy
demand for labor at some periods and a falling off in others appears
to me to be a problem that will have to be met by the employers
realizing that it is a real problem. I think that labor can help in
the matter if it is given an opportunity to by conferences, suggestions, and agreements, if necessary. Now, as an illustration in the
garment-making industry it has been demonstrated that it is impossible to supply more than 40 weeks work out of the 52. T h a t



means that for about 12 weeks a number of those employed in the
garment industry must secure employment in other lines of industry.
The CHAIRMAN. I S it practical, from your observations, to pay
those employees a 52-week wage for the 40-week service, to stabilize
the income if you can't stabilize the employment ?
Mr. GREEN. Well, I think it would be practical, yes, to do that. I
think that could be done very readily if the employers would realize
that they assumed an obligation wnen a man sought and secured
employment with them—an obligation to commit the man to continuous employment. Of course, that would add to the cost of the
manufactured article, and that would be passed on to the public.
They have experimented, as you know, Senator, in this matter of
creating unemployment funds through contributions of certain sums
by employers and a relative sum by the employees. And then out
of the fund thus created unemplojonent benefits have been paid for
a period, say of from 12 to 14 weeks. But that is quite a burden,
and after all, it is just about the same as paying them steadily, anyhow, except that the employee is compelled to contribute. Here's
the thought in connection with that. The first thought about it in
connection with the shoe industry was that if the manufacturer's
goods could be standardized some plan could be brought about so
that employment could be standardized, and thus during dull periods
they would be enabled to stock up and supply the United States when
the demand came. I t would help tide them over these periods.
The CHAIRMAN. YOU are not so optimistic as to say that women
would stand for standardized clothes and shoes; are you?
Mr. GREEN. N O ; that is the trouble. There have been a good
many things done, however, along that line. I don't think you can
standardize women's clothes, or women's shoes. I agree with you
heartily on that. But that interferes with the employment situation
very greatly. Now, in agriculture, I don't know how you would
meet that problem. We have our harvest times and seed times, and
the demand for the harvest hands comes when the harvest is on, and
that is the main difficulty faced by all these seasonal demands for
The CHAIRMAN. I S there much difficulty in getting men to change
their environment and their homes for occupations in other localities?
Mr. GREEN. Yes; it is difficult. F o r instance, you know the
miner's situation. That is the most serious industrial unemployment situation that I know of. Everybody suggests, of course, that
thousands of miners leave the mines and go out and seek employment in other industries. Well, now, that situation seems to be
all right, but it means this, that you are asking a man that has been
associated with friends all of his life to go out and seek employment
in other industries, and that is the most difficult thing in the world,
to persuade him to leave the employment with which he has been
associated all his life.
* The CHAIRMAN. There would be difficulty from that viewpoint in
the labor exchanges; wouldn't there?
Mr. GREEN. Yes; there would be some difficulty, how great it
would, be I am unable to say. There would be some difficulty.
The CHAIRMAN. I n other words, he would not willingly give up
his long association with other people, his neighbors, and his accus



tomed work, and transplant himself to some other location, in a
strange environment, without pressure.
Mr. GREEN. N O . That is my opinion—that he will leave his home
and life environment rather reluctantly. I t is human nature to cling
to the home and the place where you have lived and to those with
whom you have associated practically all your life. Then, the character of the work must be taken into consideration. If a man is
trained, for instance, to work in mines, and to work under conditions established there, it is not an easy matter to prevail upon him
to change from that line of work and seek employment in other
lines of work. Take, for instance, mining—it is piecework, practically all of it; I suppose 90 per cent of it is piecework. They would
be called upon to go out and work by the day in other lines of
industry. That is the psychological effect.
The CHAIRMAN. With respect to your statement that stabilization
of income might be accomplished by paying 52 weeks' wages in case
employers are not able to employ workers by the year, and that that
would pass the cost on to the public, perhaps in increased prices on
commodities; as a matter of fact, society has to stand that,
anyway. We don't want to let the men starve or go without a
decent living. So, in the final analysis there are two ways to take
care of these people, one by stabilizing their income, and the other
by the unsatisfactory method of charity and philanthropy.
Mr. GREEN. That is the way I look at it. After all, it is a social
The CHAIRMAN. I t is a social question. Society has to stand
for it. One is self-respecting, and the other relies on charity and
Mr. GREEN. Yes; that is our philosophy. I n approaching this
unemployment problem we ought to find a practical means of stabilizing it so that every man may be made a steady consumer. We
believe that we have attached altogether—I was going to say too
much importance, but I don't think that would be the proper word—
but while we have been attaching importance to the problem of production we have not been giving the problem of consumption the
consideration that it deserves. Now, i i we could stabilize employment so that the great mass of the people could be guaranteed a
steady income, then we would in a measure break down this whole
structure of unemployment, because if people could be made to buy
the things that industry produced steadily, then the men would be
The CHAIRMAN. Yes. That was one of the thoughts we had in
mind when the automobile industry was quite seasonal. When the
Ford Motor Co. put into effect its $5-a-day average wage, the wage
of the workers was about $2.35 to $2.70 a day.
Mr. GREEN. Yes.

thought that, if for the days they worked they
got much more than that, they could afford to be unemployed, so far
as the economic income was concerned, for some period of the year.
Mr. GREEN. Yes.

That would stabilize the income, and that is
really the important thing—stabilization of the income if you can't
stabilize the work.



Mr. GREEN. Stabilize the income; yes.
The CHAIRMAN. S O that those who are laid off during those periods don't suffer economic distress. And that is a problem that is
up to industry, in my judgment, to solve. I t can not be solved by
legislation. I would like you to bring out any views you may have
as to what, if anything, the Federal Government can do in the
Mr. GREEN. I want to make these suggestions: First of all, I think
the problem of stabilizing employment is a problem that should be
dealt with between the owners and managers of industry and labor.
W h a t I mean by that is this seasonal unemployment—these ups and
downs. I think they ought to approach the problem with a determination to find a remedy. And in some of these high seasonal
industries, like garment making, and others, I know of no reason
why a system might not be worked out by which they could pay
these workers a steady yearly income. I don't believe that under the
present organization of some industries that that could be done. W e
know that the unemployment problem in the coal, textile, shoe, and
pottery industries is difficult. They are suffering, or were, economic
ills that must be adjusted. There is overproduction in the bituminous coal industry, there is overproduction in the textile industry,
there is a very continuous overproduction in the shoe industry, and
now the pottery industry is claiming that it is suffering from foreign
competition, and, as a result, a number of potteries in our own country are out of business.
The CHAIRMAN. S O that, in that case, a tariff is the solution, is
that correct ?
Mr. GREEN. Well, I am not so sure about that. I am not expressing any opinion myself on that particular point. Some of those associated with the pottery industry claim t h a t that is true. I am not
in the position of knowing the facts to express an opinion on it.
The CHAIRMAN. D O you know of any industries, in your wide experience, that have attempted to solve the unemployment problem
by either standardizing the yearly income or by diversification of
Mr. GREEN. Well, the anthracite coal industry did. That is, the
unemployment caused by seasonal demand, and as a result of it, up
until a year or two ago the anthracite coal mines operated quite
steadily, summer and winter. During the summer time when the
trade was slack they lowered the price of anthracite coal in order t o
stimulate the consumer to buy during the summer months, and, in
addition to that, they provided for their surplus great stocking coal
centers. And then during the winter they moved the coal from these
storage centers out into the towns and cities where it was used, and
as a result the anthracite coal industry was fairly well stabilized.
However, since the last couple of years that situation has been
greatly disturbed due to the introduction of oil-burning devices and
substitutes for anthracite coal. Now, this year they have suffered
a great deal of unemployment; I can't give you the number of days,
but they suffered very greatly.
The CHAIRMAN. During the past two years?
Mr. GREEN. Yes; during the past two years.



The CHAIRMAN. That disturbance that you speak of was in part
due to the arrogance of the operators, was it not? I mean in discouraging the public in using anthracite?
Mr. GREEN. Well, I think it was caused partly because of the anthracite coal strike, during which the operators persisted in their
opposition to the proposals made by the miners. During that period
a number of substitutes were introduced, and then when the strike
was settled the public just kept on using, these substitutes. But part
of it has been due, of course, to the steady inroads made by these new
substitutes for anthracite coal. I suppose there would have been a
great many oil burners introduced into New England and other places
even though there had been no stress because oil burning appeals to
a great many people; and it has proven in a great many instances
to be a very satisfactory sort of fuel.
Now, I can't recall many other owners and managers of industry
who have tried to stabilize industry during the seasonal fluctuations.
I have heard about some who have been considering the problem and
who have been diligently endeavoring to apply a remedy.
The CHAIRMAN. H a s the American Federation of Labor any committee or agency which studies this matter ?
Mr. GREEN. Only in our modest statistical department, so far as
Ave are able to do it. We have gathered statistics or figures on unemployment. I will leave them here with you if you care to have them.
We also have some here on fluctuations in employment, and the effect
that unemployment had upon charity distribution.
(At this stage Mr. Green handed to Doctor Lubin several documents and charts, to which reference is made during the following
proceedings, and which are appended hereto.)
These are figures on unemployment that we gathered from our
own representatives in different towns and cities throughout the
country during the year 1927. This gives the percentages. Now,
here are the fluctuations in the building trades as we have it in the
different months. Would you like to have this ?
Doctor LUBIN. Yes.

Mr. GREEN. NOW, the building trades are a fairly good barometer
in the towns and cities, and that is the reason we have emphasized
the building trades. Now, in this chart here—I will not trouble
you about this. Senator, but I will explain it to Doctor Lubin. This
black line indicates the number of dollars distributed each month.
I t goes up here, you see. Now, the red line indicates the number of
men employed, and so on, as reported by the employers' association,
representing approximately two-thirds of the working population or
Detroit. This is in the city of Detroit.
The CHAIRMAN. They have one of the best reporting facilities, I
think, in the country.
Mr. GREEN. I think they have. And you can see by this [indicating on chart] that as employment went up the distribution of charity
came down—down, see—up—down. And as one comes down the
other goes up. The figures are there. This gives the figures on
machinery, and this on displacements.
The CHAIRMAN. I understand you were in New Orleans at the
time the conference of governors proposed a sort of reserve for unemployment; is that correct?



Mr. GREEN. Yes. I was coming to that. Now, first of all. on this
seasonal unemployment, the situation could be helped if the employers and employees would apply themselves to a study of the
causes and then seek to apply a practical remedy so that the workers
would be guaranteed a steady and fixed income. That, in my judgment, would go a long way toward relieving the unemployment situation, because it would guarantee a steady income and develop the
purchasing power of the masses of the people; and that in turn would
be reflected in increased activity in the industrial output.
The CHAIRMAN. Would it also be an incentive for employers to
use more imagination and foresight in their planning?
Mr. GREEN. Yes. Now, on the displacement of men by machinery,
I think that is a problem that ought to be considered by employers
and employees, and, perhaps, by some representatives of the Government; because, in my judgment, that will eventually become a very
acute problem. Thus far we have not suffered much by machine displacement because the newer industries have absorbed those thrown
out of employment through the introduction of machinery. For
instance, the automobile industry during the past 20 years has grown
and developed, and as a result of it it has called for the employment
of hundreds of thousands of men. Then came along the automobile
accessories, filling stations, and all that; and they afford employment
to hundreds of thousands. Then came the radio and the airplane.
It is reasonable to conclude that the peak of absorption will some
time be reached, and yet we are just at the edge, as it were, of mechanical development.
Improvement will go on and on and industry will be equipped
with machines more and more. The machinery will be perfected
and improved and the steady displacement of men will go on. Now,
we can't afford to have these men become permanently unemployed,
because that would disturb the market. We must keep up the market
as well as keep up production. The American Federation of Labor
has never stood in the way of the introduction of machinery. We
have invited it. We have felt that machinery relieved drudgery and
toil, and that its expanded use would help increase the income of
the working men and women; and, as a result, it would be a blessing
to the great mass of the people. So in making this point I don't want
to be understood as placing the American Federation of Labor in
opposition to the introduction of machinery in industry. What I
am calling attention to is the problem ot unemployment caused
through the machine displacement of men, and this is a problem that
is so impressive that we ought to think out at least some ways and
means by which we can steadily take care of the men who are displaced through the introduction of machinery. That is a phase of
our unemployment problem that I consider as of extreme importance.
Now, just how it can be done is difficult, I think, for any man to
foresee; but I think that there ought to be an honest approach to the
consideration of that subject now and not wait until it becomes really
acute, not sit down, as we do in these ups and downs, and wait until
we have 1,000,000 or 5,000,000 men on our hands, but consider now
what we are going to do with this number of men that are being displaced through the use of machinery.
The CHAIRMAN. Well, now, the federation has proved competent to
do that job on its own account. Is it doing anything toward that end ?



Mr. GREEN. I t is a difficult thing for us to do that, Senator. The
trouble is that not all of the employers of the country will work
with us. They wilj not confer with us. They will not hear us. They
are hostile to us. So that it is difficult for us to make an approach
and to make a contract and get consideration of the subject, but we
are endeavoring to do what we can by arousing public opinion to a
consideration of the subject and by calling attention to the number
of men that are being displaced.
Now, in some trades we are trying to take care of them the best
we can, but it is becoming a more and more difficult problem.
The CHAIRMAN. Take these industries that you are cooperating
with; could you not make a study in cooperation with them as to
the best means of solving this question of unemployment due to
Mr. GREEN. We can, of course, with a number of the trades, like
the building trades, the printing trades, and a number of miscellaneous trades, with which we have contract relations.
A strange .situation exists, Senator, among the musicians. The
musicians' unions are grappling now with that very problem through
the introduction of the talking pictures. Musicians are being displaced and their organizations are grappling with that problem now.
J u s t think of those men that have become artists, in big orchestras,
men who studied music for years, men of genius, who are thrown
out, being displaced, through "the introduction of mechanical devices
—the talking pictures. Among these, it is skilled people, artists,
that are being thrown out. I t is a pretty tough thing for a man
that is skilled to go down and accept employment at unskilled work,
unskilled industry. The artist, the musician, what is to become of
Doctor L U B I N . I found 40 of them discharged in Baltimore.
Senator W A L S H . I didn't hear that it was reaching out in that
direction; did you, Senator?
The CHAIRMAN. N O ; I haven't.
Senator W A L S H . I have heard about telegraphers being thrown out
of employment by the introduction of new inventions that are being
Mr. GREEN. That displacement of telegraphers has been within the
past six years.
Senator W A L S H . A man can now turn on a machine and then have
nothing further to do with it.
Mr. GREEN. The displacement of these musicians, skilled people,
through the use of machinery, is causing considerable trouble in a
number of places. What are we to do with them—Jet them go out
and work with pick and shovel? That is a difficult thing to determine.
The CHAIRMAN. Have you asked the question that you had in
mind, Senator?
Senator W A L S H . I would like to ask about a letter we have here.
Among the things I wish you would give some thought to and let us
have your views later if you haven't thought of anything yet, is
the thoroughness and accuracy of statistics prepared by the Department of Labor and the various State departments in reference
to unemployment. There seems to be no distinction made between.



part-time employment and unemployment. As I interpret the figures that are gathered, if a man works one day or week or a month,
he is regarded as an employee, and we are not able to get a true
picture of the industrial conditions because there are no statistics
that show the extent of the part-time employment. Am I correct
about it?
Mr. GREEN. Yes; that is correct.
Senator WALSH. I would like to get a better picture of the real
employment conditions in the country by having only statistics of the
people who are carried on the pay rolls regularly, and not statistics of
those carried part time. You appreciate that, Senator?
The CHAIRMAN. Yes; I understand the point.
Senator WALSH. I wish you would see what we can recommend in
the way of collecting statistics, or urging our departments, or compelling them, if necessary, to get statistics of a more accurate and
more definite character than we have been able to get. I am going
to read a letter along that line that came here in September from
Worcester, Mass. [reading]:
In considering the unemployment problem of Massachusetts in considering the rating that the Manufacturers' Association gives in reference to employment, it has been called to my attention that the figure, which they give
and which would seem to indicate that employment was on the increase and
that there was not a considerable amount of unemployed, is arrived at in this
A man is employed by Crompton & Knowles. He is laid off and may work
for one day a week, or one day every two or three weeks or even one day every
six months, but he is still kept on the roll of employees of Crompton & Knowles,
although as a matter of fact he is working so brief a period of time that the
fair interpretation would be that he was not working.
He gets employment for two days a week with the American Steel & Wire,
and is listed as being an employee of the American Steel & Wire. This would
indicate that two men were being employed, while as a matter of fact one man
is being employed; and then he is only being employed a short period of time.
I think there is no doubt but that this condition prevails throughout among
the Massachusetts Employers'Association and, of course, is used for the purpose of deceiving the public regarding the employment conditions here.

I do not think that this is meant intentionally to deceive, but I
think the result is that we do not get an accurate and correct picture;
and I wish that you and your federation would think of that problem
and see if some way can not be devised to collect statistics to give us
a better picture. Mr. Grady knows that in Massachusetts one of
the problems we have had there is the part-time employment problem.
I t has been a great problem. It hasn't been unemployment, but it
has been part-time employment. It is a fact th&t men with families
have only been working two or three days a week for the past four
or five years. Yet the records show that they are employed and the
reports are to that effect.
I want to ask you now if some one in your federation would make
some suggestion along this line. The question has been suggested
by Senator Couzens and has been asked of other witnesses, and it is
relative to what appears to me to be a growing tendency upon the
part of employers to dismiss an increasing number of their employees
each year who reach what they call old age. My attention has been
called to several cases where men who have just passed the age of
50 have been discharged, with the statement that they had outworn
.their usefulness and reached an age where they didn't care to keep



them any longer and were going to supplant them with younger
men. I would like to know to what extent that practice is growing
in the country and what, if any, suggestions you have to make as to
what can be done to meet the economic losses and hardships that
result from the dismissal of the men who have spent the best years
of their lives in an industry and who are dismissed before they are
old men.
Mr. GREEN. Well, Senator, that has been a problem that has been
ever present with us. I t has been present with us for a great many
years. Connected with that has been this policy of physical examination instituted by a great many employers, particularly those
who own and manage the mass-production industries of the country.
And we have been deeply concerned about the policy pursued, about
either dismissing men when they reached the age of 45 or 50 years,
or refusing to hire them when they reached that age in life. Now,
where we have direct relations with employers we are fairly able
to protect and prevent discrimination against them after they have
secured employment because we have objected to men being dismissed
without cause. I n the building trades, the printing trades, and miscellaneous trades, where we have contractual relations, we have been
able to do something along this line. Where the men are earnest
men and give good service and are doing their work right they should
be permitted to remain. But in employing men they, of course,
discriminate against the older men; they seek to employ the younger
Now, how to meet that, Senator, is a difficult thing, because you
can't very well say to an employer, " You shall do thus," or " You
shall not do so and so." I t appears to me, however, that that is a
matter for public opinion and public conscience, that the public
should be aroused to this practice, and that there should be a general
attempt made on the p a r t of the public to see that the practice must
cease and that every man must be given a fair opportunity to earn a
decent living. How to meet the problem through legislation I can
not see.
The CHAIRMAN. Isn't it a condition comparable to an injury in
the course of employment ? If a man is injured in the course ot his
employment the laws of most of our States compel the employer to
compensate him for the period of his incapacitation.
Mr. GREEN. T h a t involves the question of old-age pensions. I t
also goes into that.



Mr. GREEN. And then you get into the matter of States' rights
and State legislation, and, of course, it would be mighty difficult to
attempt uniform legislation on that subject.
The CHAIRMAN. I t probably could not be done nationally, but in
our report we could recommend that as one of the remedies for the
various States to consider.
Mr. GREEN. Well, yes, and perhaps you know—I am sure you do—
that studies are being made upon that subject in many of the States.
We have been making a study of it. We made a report upon it to
the New Orleans convention; that is, on the subject of old-age pensions. The point you raise touches that very closely, but I don't
think a man 45 or 50 years of age is ready to be classed a* eligible




for an old-age pension. I think he has many years of usefulness
before him and it should be possible for him to earn a living until
he is incapacitated. It is not a question of putting him on a superannuated list, because most men at 45 are able to work.
(The following material was submitted for consideration of the
committee by Mr. William Green, president of the American Federation of Labor:)

However, no governmental or other agency had been recording the results of
displacement of workers by mechanical devices and power. We know some such
displacements as these were in progress:
Steel.—Seven men now do the work which formerly required 60 to perform
in casting pig iron; 2 men now do the work which formerly required 128 to
perform in loading pig iron; 1 man replaces 42 in operating open-hearth
Machine shops and railway repair shops.—One man replaces 25 skilled machinists with a " gang " of 5 or 10 semiautomatic machines; 4 men can now do
in 3 to 7 hours what it formerly took 8 men 3 weeks to perform in repair work
on locomotives, due to oxyacetylene torch; 15 years ago it took 15 to 30 hours
to turn one pair of locomotive tires. Now it takes 8 hours to turn 6 pairs with
same number of men by use of modern processes. (Time reduction: 15-30 hours
to 1 hour and 20 minutes.) Thirty workers with 10 machines now do the work
of 240 workers with 20 machines in the Sun Tube Corporation machine shop.
Brick.—A brick-making machine in Chicago makes 40,000 bricks per hour. It
formerly took one man 8 hours to make 450. Change: It would take 711 hours
to make 40,000 bricks by the old method with one man working. It now takes
one hour.
Glass.—The most up-to-date automatic machine makes in one hour what it
would take more than 41 workers to make by hand in the manufacture of
4-ounce oval prescription bottles. In 25 and 40 watt electric bulbs the manhour output of the automatic machine is more than thirty-one times that of the
hand process.
Cranes and tractors.—Three men replace 28 in Youngstown Sheet & Tube Co.
with tramrail crane; 5 men with tractors replace 48 men as crane loaders in
Willys Overland Co.
Conveyors.—Five men do three days' work in one day in emptying brick kiln.
Paper-oox industry.—In New York, from 1914 to 1925, the number of workers
decreased 32 per cent while the output per wage earner increased 121 per cent.
General.—In the automobile industry the same number of men are producing
three times as many cars as in 1914; steel mills turn out twice as much again
as in 1913.
On the other hand, occupational shifts resulted from the development of new
industries, new inventions, and new customs. There has been a decrease in
agricultural workers of over 8,000,000 (1920-1925). While those employed in
all manufacturing industries have decreased in number, the automobile industry, rubber tires, electrical machinery have increased the number on their pay
rolls. Such new industries as the manufacturing of radio sets, airplanes,
mechanical refrigeration have required large work groups. Salesmanship and
service forces for automobiles, radios, and electrical products have opened up
new jobs for over 1,000,000. Mail-order houses, chain stores, and distributors of
household appliances afford other work opportunities. Motion-picture houses
employ about 150,000. Insurance companies have increased their employees by
about 100,000; the telephone industry by 660,000. The number of barbers and
hair dressers have increased by 160,000 in the past seven years. There has
been a very great increase in clerical workers and in the electric-light and power
industry 53,000 more are employed.

Regularity of employment.—One of the most fundamental aims of wage
earners is regularity of employment. The whole organization of life for the
wage earner and his family depends upon steady income. The commercial
organization of the community is in turn dependent upon the incomes of its



residents for sustained patronage. When groups of workers of the community
are unemployed business depression follows. The business community and the
wage earners have a common concern for regularity of work.
During the past year reports of unemployment reached headquarters with
insistence and frequency. No Government agency had data disclosing the size
of the problem. Definite information on unemployment was necessary to constructive planning of industries, or even a presentation of the difficulties wage
earners were facing. Unemployment seemed higher than seasonal changes
alone could account for. The census gave changes in the total number of
workers as follows:
Wage earners
Wage earners
4, 712, 750 1922
8, 778,150
5,468,400 1923
7, 935,450
6,615,050 1924
7,036, 250 1925
8,401, 050
9,096,350 1926
8,076, 550
9, 288, 050 1927
6, 946, 550
It was in the period from 1919 to 1927 when introduction of new machinery
and changes in manufacturing process greatly increased productivity in manufacturing industries. The effect of machine displacement upon the workers is
shown by the fact that there were 1,000,000 fewer workers in the manufacturing
industry in 1927 than in 1919, a decrease of 11 per cent. It is estimated that
during this period the productivity of the individual workman in manufacturing
increased between 45 and 49 per cent. (Study by Woodlief Thomas of the
Federal Reserve Board, published in March supplement, the American Economic
Quite aside from occupational shifts and development of new industries, the
federation instituted a reporting system covering the regularity of work for
members of trade-unions. The details of this work are given above.
The following table shows unemployment for all manufacturing industries
and for the construction, metal, and printing trades workers:
Unemployment in trade-unions*
Percentage of unemployed members
to D e c , Jan.,
Atlanta, Ga
Baltimore, Md
Birmingham, Ala__.
Boston, Mass
Buffalo, N . Y
Chicago, 111
Cincinnati, Ohio
Cleveland, Ohio
Denver, Colo
Detroit, Mich
Jersey City, N . J
Los Angeles, CalifsMilwaukee, Wis
Minneapolis, M i n n .
New York, N.Y..__
Paterson, N . J
Philadelphia, Pa
Pittsburgh, Pa
San Antonio, Tex___
San Francisco, Calif.
St. Louis, Mo
Seattle, Wash
Washington, D. C _
Total building
Total metal trades..
Total printing
Total all trades



8 21
3 16








15 1
18 |






















4 '


5 1



i For an explanation of the collection and computation of the figures, see March, 1928, American Federationist.
> Only for November and December.
3 Only for December.



Obviously the building trades have a serious problem in irregularity of employment that extends throughout the year.
To deal with the problems of unemployment we recommend the following
(a) Employment service.—We believe that there should be a nation-wide
employment service either under Federal management or supervision. Such
service would prevent much distress among workers and would be an advantage
to employers needing workers. It would help to prevent overmanning industries
locally to meet temporary expansions and would greatly help in enabling workers
to adjust to occupational shifts and industrial developments.
Such an agency was operated by the Federal Government in the late war with
many good results. It should be organized on a practical peace-time basis.
(&) Stabilization of industry.—In addition to all these phases of the unemployment problem there still remains an approach to the problem that promises
more lasting results than all others—stabilization of industry. Responsibility
for solving this problem devolves primarily upon management. However, the
organized workers through trade-unions can make a functional contribution. By
cooperation with management in eliminating wastes and development of better
technical procedure the trade-unions can help develop a stabilization of production that will bring regularity of work.
As example of this we quote results' from union-management cooperation on
the Canadian National Railroad.
On the Canadian National Railroad, where cooperation has also been in effect
since 1924, records of improvement in employment stabilization show that in the
4-year period ending December, 1927, there has been an increase of 14% per
cent in the earning capacity of each wage earner due to increased employment.
This has amounted to an actual average increase of $150 for the year 1927
over 1924 for each employee in the shops of the Canadian National. Besides
this increase due to stabilization of employment, the Canadian National agreed
through negotiation with its employees to establish one week's vacation with
pay each year.
Unemployment in the building trades.—There are 1,400,000 building-trade
workers in the United States. We have found that the average unemployment
in the building trades reporting to the federation for the first 11 months of 1928
is 27 per cent. This represents an average monthly unemployment of 378,000
Unemployment in all trades.—There are 3,000,000 union workers represented
In our reports. We find the monthly average of unemployment to be 14 per
cent, or 420,000 are represented as being unemployed during the first 11 months
of 1928.

Reports from charitable organizations show a close relation between unemployment and the payment of relief. Since unemployed workers exhaust every
means of support before applying to charity, and draw on savings or deprive
themselves of necessities during the first months of unemployment, the demand
for relief usually comes about two or three months after the beginning of an
unemployment crisis.
The acute unemployment situation in the depression of 1921 and the consequent demand on public relief is shown by a report from the city of Detroit. 1
In four months from August to December, 1920, employment fell from 183,000
to 27,000^-that is, 85 per cent of those employed in August were out of work in
December. By February large demands on relief were beginning to be made,
and by March, 1921, the relief payments reached a high peak. From October,
1920, to March, 1921, relief increased from $33,000 to $309,000.
Reports from 1920 to 1928 show that there is continually a very close relation
between decreases in employment and increases in relief. The community
bears the cost of unemployment.
Report from department of public welfare. Figures on employment are from Employers Association and represent two-thirds of the working population of Detroit.






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tt> o









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Al\ Trades Unemployment








Ho, Represented





3,000,000 given as the number of men represented.







300,000 420,000



The CHAIRMAN. J u s t state for the record your name and occupation.
Mr. BENNETT. My name is A. C. Bennett. My occupation is
office manager of the Packard Motor Car Co., Detroit, Mich.
Senator Couzens, I have been asked to come down here before this
committee presumably because we have established a reputation for
giving stabilized employment at our rjlant, and possibly that has
been true to an extent. We hope that it has been, because we have
tried to make it that way. However, we realize the question is so
tremendously involved that we appreciate that we haven't made all
of the progress t h a t we can make. We feel that the more information we can get to help us in that problem the more we want, because
we are by no means perfect.
Now, with your permission, I shall endeavor to answer the questions which you included in your letter with a view to giving you
a picture of just what we have done.
The CHAIRMAN. We would be very glad to have you proceed, Mr.
Mr. BENNETT. Your first question is, " H o w irregular was employment in your plants before you attempted to stabilize it? " We
have always tried to provide regular employment. However, during
the past several years this has been less difficult to accomplish because
of our expanding business. That, in a way, is the keynote of what
I have to say.
Your second question is, " By what means did you undertake to
provide steady employment ? " Those factors which involve the
ability to expand our business are the same as those which promote
to the greatest extent regular employment. However, in recent years
more complete and accurate statistics have become available regarding the rate and kind of consumption of our product. I n addition
to this we have continued to study even more intensely the quality
and competitive desirability of our product and to provide the public
with that which they want and which, in our judgment, they will
want if we are able to make it available to them. This desire to
produce what and as our public wants is the fundamental basis for
regular employment; in other words, stabilization of employment
and continuous production.
The third question is, " W h a t problems did you encounter in bringing about regular employment?" The most impressive problems
which confront us in our desire to bring about regular employment
are those that might naturally arise in the execution of methods to
obtain satisfactory information. For example, this report [exhibiting same] comes to us from our dealers at 10-day periods during a
month containing, as you realize, the fundamental factors involved
in production and employment. I will leave this sample copy of that
report with the committee. (Keport referred to by Mr. Bennett is
appended below.)
I n addition, we use a long-time forecast of our business as well as a
short time—three months—forecast which is subject to some revision
as current facts become known. However, the interpretation of these



facts and conditions is really the most important consideration and
these final conclusions, of course, rest with our president, Mr. Alvan
The fourth question is, " H o w successful have you been in your
efforts ? " I t is almost impossible to answer this question, because
our business has been expanding and the same factors which provide
for an expansion in business will also provide for the most regular
employment if successfully carried out.
The fifth question is, " To what extent can similar measures be applied to other plants and other industries ? " Our knowledge of conditions in other industries is limited, of course. I t may be more or
less difficult to use the same methods that we use. However, these
methods seem to be fundamental, and to our limited knowledge are
applicable to other industries also. I t is a matter of very rigid and
close market analysis, plus the expansion of our business, and we
do not have definite proof of our success because we have been expanding in recent years; and with an expansion program we have
little chance of unemployment, because we are continually hiring new
employees. That is very general, of course.
The CHAIRMAN. YOU don't mind if I interrupt you, do you?
Mr. BENNETT. Not at all.
The CHAIRMAN. I was wondering

if industry can keep on expanding, as you have ; at all times, with the state of productivity of the
country. W h a t is to become of the industries that can't continue to
expand ?
Mr. BENNETT. That is a problem we hope to solve at the time. We
haven't discussed the problem of the unemployed at a time of critical
business depressions, but have discussed rather the minor business
depressions which we have throughout the year. We have to deal
principally with seasonal fluctuations in our business.
The CHAIRMAN. Well, how have you dealt with the seasonal problems in your industry. Do you lay off men at some periods and employ them at others?
Mr. BENNETT. T O a minor extent, of course. We try, by an analysis
of our market, by knowing how and when our product will sell, to so
forecast ahead and to keep our fingers continuously on the situation
by the use of statistics on all available economic conditions, so that we
will be able to set for ourselves a monthly schedule that will be the
same possibly for each month.
The CHAIRMAN. Have you any figures to show your fluctuations
during the past few years?
Mr. BENNETT. Yes; I have a statement here. That information is
given here for the past few years. Would you like me to read this?
The CHAIRMAN. Yes; if you will.
Mr. BENNETT. There was a slight business depression in 1924, if I
remember correctly. During that year we had approximately 5,000
employees on the roll; that is, on a monthly average for the calendar
year. I will read the statement [reading] :



Average number on factory roll of PacJcard Motor Car Co. (1922 to 1928)
Labor turnover (per cent) _










The CHAIRMAN. Y O U spoke of the average for those years that you
just read. Of course, that doesn't really answer the question, for
the reason that when you average it that way some of your employees may have been out of work for three months, others six
months; and as they need their wages from month to month it does
not solve the problem to average them, does it ?
Mr. B E N N E T T . T h a t is true. That is the thing we are trying to
The CHAIRMAN. That is what we are asking. Have you been successful in eliminating the number of employees that you employ
month by month?
Mr. B E N N E T T . During the past two years I would say we have been
fairly successful.
The CHAIRMAN. H O W ? Just by this plan ?
Mr. B E N N E T T . B y planning for production and stabilizing employment.
The CHAIRMAN. Let us say, for instance, that your knowledge or
forecasts may have been inaccurate and incorrect. W h a t would you
do if your orders didn't come in as you had forecast? Would you
lay off the men?
Mr. B E N N E T T . What we did do for a few months in the early
part of 1927, instead of working a 5%-day week we kept all of our
men on the roll instead of laying them off, practically all of them, as
many as we could, and worked them four days a week for a few
months, giving them an opportunity to earn at least four-fifths of
their previous earnings.
The CHAIRMAN. W h a t year was that?
Mr. B E N N E T T . The early part of 1927.
The CHAIRMAN. W a s the business a little slack in 1927 compared
with 1926 and 1928?
Mr. B E N N E T T . I believe that it was. I t was caused by a general
slowing up of business, a slowing up in orders for 1926-27, and was
a little slow until the summer and fall of 1927.
The CHAIRMAN. Have you any rules and regulations with respect
to the ages at which you employ applicants for work ?
Mr. B E N N E T T . Yes; we have.
The CHAIRMAN. What are those rules and regulations?
Mr. B E N N E T T . Each man who is employed, who is over 50 years
old, must have the approval of the head of the department.
The CHAIRMAN. Under what circumstances do you approve or
disapprove of the employment of a man over 50 years of age ?



Mr. BENNETT. I am not the one who approves that. We have a
system of physical examinations. If the man applying for work has
previously been with us, we are very generous in putting him back
on the job if he has been off for only a comparatively short time.
There is practically no exception to that. If he is an entirely new
man, we question him.
The CHAIRMAN. I n what way do you question him?
Mr. BENNETT. For this reason
The CHAIRMAN (interrupting). N o ; in what way do you question
him if he has not been in your employ before? For what reason?
Mr. BENNETT. As to his physical condition, with a view to ascertaining whether he will be able to keep up with the job he is going
to be on.
The CHAIRMAN. What are the factors in determining that he should
not be employed? Does it depend on the kind of job it is?
Mr. BENNETT. I t depends on the kind of job he is going on. If
there is a hazard in it, and he is not active, he shouldn't be placed
on it, but should be given another job.
The CHAIRMAN. D O you give him another job or do you just
dismiss him ?
Mr. BENNETT. We try to give him another job.
The CHAIRMAN. H O W many cases of such character come before
you in a year ?
Mr. BENNETT. On rejections of that nature, I haven't the records
here, but in a year there wouldn't be over 20 to 25 men.
The CHAIRMAN. That would be rejected?
Senator W A L S H . And who are already in your employ?
Mr. BENNETT. N O ; those who are new men. There have been no
rejections in the past four or five years of men who have previously
been in our employ.
Senator W A L S H . Would you employ a man over 50 years of age
as readily as you would one of 20 or 30 years of age ?
Mr. BENNETT. N O ; we don't, because the positions we have for
them are those that require fairly active men.
The CHAIRMAN. The witness stated, Senator, that the employment department employs the men without reference to him, but if
they are over 50 years of age they must be referred to him.
Doctor L U B I N . What reason do you have for rejecting a man other
than the fact that he is not active enough? Is there anything in
your pension system, or something of that sort, that bears upon it?
Mr. BENNETT. His fitness for production, as to whether or not he
can get it out, and the fact that he might be injured in his employment. Those are the things considered.
The CHAIRMAN. D O you have a pension system?
Mr. BENNETT. We do not. We have studied every pension system
we could get hold of, but we have been unable to find one that would
be satisfactory. This is our plan now, we don't know whether we
can carry it out or not, but we do t h i s : When a man becomes unfit
for production—that is, when he is too old and worn out to keep up
with the younger fellows on the production line, or on some job where
they are working on a bonus plan where he could not keep up with
the rest of them—we analyze his case very thoroughly and it requires the approval of our vice president to put him into a special



department which we calj the " D F " department, because we don't
want to call it the salvage department.
The CHAIRMAN. W h a t do you mean by " D F " department?
Mr. BENNETT. Those are merely numerals indicating the department.
The CHAIRMAN. Dead file ?
Mr. BENNETT. Those are numerals that are used merely to indicate
the department, just as the letters " D M " are used for cylinder
The CHAIRMAN. W h a t are the minimum and maximum wages you
pay in your plant?
Mr. BENNETT. For hourly work?



Mr. BENNETT. I can't give it to you accurately, but approximately,
if you want it—45 cents to $1.50 an hour. There might be some
higher than that.
The CHAIRMAN. The minimum, anyway, is 45 cents an hour?
Mr. BENNETT. Fourty-four or forty-five cents an hour is practically
the minimum.
The CHAIRMAN. D O you work eight hours a day ?
Mr. BENNETT. Nine hours now; 50 hours a week.
The CHAIRMAN. Fifty hours a week ?
Mr. BENNETT. Yes, sir.

you given any contemplation of a 5-day
Mr. BENNETT. I t has been considered, I believe, although I can't
give you an opinion that would inform you on the point.
The CHAIRMAN. The question the committee would like to know
about is what you would do in case of contraction of business rather
than expansion.
Mr. BENNETT. I can only say that if we can master the seasonal
fluctuations in the business we will have greater opportunity to
master the other if it comes. Through very close analysis and keeping in close touch with our market, all phases of it, we shoujd be
able to eliminate unemployment to an extent if we get into a major
The CHAIRMAN. YOU are planning for that now, as I understand
Mr. BENNETT. We have no definite plan now, Senator Couzens.
The CHAIRMAN. NOW, assuming that in 1928 you had 10,000 men,
and there was a retraction in the business in 1929, so that you only
had to produce four-fifths of the 1928 business, would you reduce your
staff to four-fifths?
Mr. BENNETT. More likely we would have every man work fourfifths of the time.
The CHAIRMAN. And keep the same number?
Mr. BENNETT. Yes. That is the best solution we have arrived at
Doctor L U B I N . Do you have any scheme for storage through dealers
so that you can keep your men more regularly employed each
month ?
Mr. BENNETT. D O you mean storage of cars?
Doctor LUBIN. Yes.



Mr. BENNETT. Yes; we expect our dealers and distributors to take
an adequate number of cars through the lean months to provide for
the peak months. We do it through education.
The CHAIRMAN. Have you given any thought as to whether the
Federal Government can do anything to stabilize employment?
Mr. BENNETT. Since receiving your request to come to Washington
we have thought about it, but can't give you any definite opinion. I
believe, to a very large extent, something must be worked out by the
individual manufacturer.
The CHAIRMAN. Have you any questions to ask, Senator Walsh ?
Senator WALSH. N O .

The CHAIRMAN. Have you any further statement to make, Mr.
Mr. BENNETT. I have nothing further to say, Senator Couzens,
unless there is something I can tell you that will be helpful. You
appreciate, of course, that my remarks here have been very general.
I don't know otherwise how to treat the subject.
The CHAIRMAN. I remember seeing the weekly statements of fluctuations of employment in Detroit. There was always a statement
attached that it wasn't 100 per cent. I don't remember what it was.
Are you a member of the employers' association ?
The CHAIRMAN. And you report
Mr. BENNETT. Yes, sir.
The CHAIRMAN. Your reporting

your employees to them ?

facilities through the association
are based upon four-fifths of this employment; is that it ?
Mr. BENNETT. That is, the reports that we previously got?



Mr. BENNETT. I believe it is 93 or 95 per cent of those employed in
The CHAIRMAN. I t is as high as that, is it ?

hearing the statement of Mr. Green, president of the American Federation of Labor, here this morning, and
the questions asked of him, if anything further occurs to you that
would be helpful in this discussion we would be very glad to have
you file any further statement or report which you have to make, not
only to assist the committee in considering the question, but in giving
information to others that would be helpful.
Mr. BENNETT. I have already mentioned about the problem of
taking care of the older men. We do not get many applications in
the first place from men that have not been with us, and those that
are with us we take care of. W e put them on jobs. I n a big manufacturing plant there are certain jobs those men can be put on, and
we feel that that is the very best thing to do, because the minute you
pension an old man and say he is through, that there is no more
work left in him, he is quitely likely to be unhappy and die.
The CHAIRMAN. YOU spoke of the older men who are not able to
keep up with the younger men. Are those cases picked out and
referred to some other department, for consideration in some other
place ? Is that the idea ?
Mr. BENNETT. Yes; for consideration in this one department.
The CHAIRMAN. T h a t is, the " D F " department?



Mr. BENNETT. Yes. We don't take them out unless it is absolutely
The CHAIRMAN. YOU say the older men would sometimes interfere with a group bonus—that is, a bonus based on the production of
a group of men i
Mr. BENNETT. Yes. I n an individual department every man in
the department participates in the bonus, and it is of interest to
each man in that department to do his utmost to establish the per
cent of the bonus.
The CHAIRMAN. I n case a department speeded up and earned a
bonus, the bonus would go to the group in that department and be
divided equally ? Is that the idea %
Mr. BENNETT. Yes, sir. If they make a 20 per cent bonus they
get 20 per cent added to their pay check.
The CHAIRMAN. I S that for each period, or how ?
Mr. BENNETT. Each period, each half month.
The CHAIRMAN. Doctor Lubin, have you any questions to ask?
Doctor L U B I N . YOU said earlier, in talking to me, that you felt
that by the development of statistical information you could more
efficiently provide for the future and perhaps with sufficient information make provision for major cyclical depressions. Are you getting
any help now from the Federal Government along that line? And
d o y o u think the Government could help you more ?
]VIr. BENNETT. We do use figures and get most of them from the
Department of Commerce, but so far as their use in solving any
problem is concerned I have always felt that the figures were late
m coming and that we already had a picture of the economic condition throughout the country through our own methods.
The CHAIRMAN. If there is nothing further we will adjourn until
10.30 o'clock Monday morning.
Report form submitted regularly by dealers to Packard Motor Car Co., showing
state of dealer's business
1-10 11-20 21-31 Total 1-10 11-20 21-31 Total 1-10 11-20 21-31 Total 1-10 11-20 21-31 Total

Gross sales
Net sales

Gross sales
Net sales

Gross sales
Net sales



(Whereupon, at 12 o'clock noon, the committee adjourned until
Monday, December 17,1928, at 10.30 o'clock a. m.)



WccsMngton, D. C.
The committee met, pursuant to adjournment, at 10.30 o'clock
a. m., in the committee room, Senate Office Building, Senator James
Couzens presiding.
Present: Senator Couzens (chairman) and Walsh.
Present also: Dr. Isador Lubin, economist, of the Institute of
Economics of the Brookings Institution, Washington, D. C.
The CHAIRMAN. We are ready to proceed.
Doctor L U B I N . This morning we have Mr. Daniel Willard, president of the Baltimore & Ohio Eailroad.
The CHAIRMAN. Mr. Willard, we understand that you have contributed quite considerable to the regularization of the work of employees, and we would be glad to have you tell us in your own way
what you have accomplished; what your experience has been in that
Mr. WILLARD. Mr. Chairman, I haven't had much opportunity since
I heard from you to prepare for this hearing, and I will have to tell
you out of mind and from such statements as we keep currently what
we have been able to accomplish in the way of i stabilization of labor
on the Baltimore & Ohio Eailroad. I t is not for me to pass judgment on what we have done. I know that we are keeping a more
stabilized force at work now than formerly and before we began to
give serious thought to the matter. That I do know. Whether we
have done as much as we ought to do is another matter. I am quite
sure we haven't done as much as we will do, or as much as we could
do under conditions which I will refer to later on.
The first inquiry in your questionnaire is, " H o w irregular was
employment in your plants before you attempted to stabilize i t ? "
That is almost like asking " H o w large is a piece of butter?" because there is no real standard to measure it by. If we were to take
the year 1922, the year of the shopmen's strike, I recall that we hired
42,000 men within a period of six weeks. They nearly all left after
seven or eight weeks. The turnover was pretty rapid just then.
The next year, 1923, we had unusually large forces in almost all the
departments because we were trying to make up what we had lost the




year previous, and our forces were much larger than they should be
normally, particularly in the mechanical department. Since that
time we have shown a gradual trend downwards in the number of
men that are employed and less variation during the year.
Here is a statement which we prepare every month showing the
number of men employed in the different departments and the total
man-hours worked, and you will see by that that the tendency during
the last five years, from 1923, has been quite consistently downward
all the time and the flunctuations have been less marked. Taking
1923 as a standard, our turnover was probably not less than 20 per
cent—between 20 and 25 per cent, I suppose. To-day our turnover
is probably less than 10 per cent, so there has t e e n a distinct improvement. We not only employ substantially fewer men but the men
we do employ work more regularly.
I have some charts here that may throw some light on that matter.
I will explain in a general way what this print means. These white
lines up and down show the flunctuations of business during the
different parts of the year, and of course our business on the railroad responds very closely to the business of the country, because,,
generally speaking, if there is not freight to move, we do not run
freight trains, and if there is an unusually large amount of freight
demanding movement we run an unusually large number of trains.
T h a t isn't true of the passenger business.
(The chart referred to by Mr. Willard faces this page.)
The CHAIRMAN. I n that connection, when your volume of freight
increases or decreases, do you work the men longer, or do you put
more men on?
Mr. WILLARD. N O ; we don't work them longer, because in the
majority of instances if the men work over their established hours
they get paid at the rate of time and a half for doing it.
The CHAIRMAN. What I was trying to get at—the decrease in the
time. Do the number of working hours per man come down ?
Mr. WILLARD. N O ; the number of working hours per man do not
change much, but the number of men changes, but in the train service, which I was referring to, that matter adjusts itself. I do not
know of anything we can do to stabilize train service unless we have
stabilized business so that the same amount of business is to be moved
all the time. Suggestions have been made in that connection that
if large consumers of coal, for instance, including the railroads, would
in the summer months anticipate their needs for the winter months
and store coal that would mean a more even operation of the railroads. Not much has been done that way, but there are possibilities,
and those possibilities are encouraged in the hard-coal business, as
you perhaps know, by reducing the price of coal, say 50 cents a ton,
the 1st of April, to induce people to ship during the summer to keep
the mines going.
This line on the print shows the greatest variation and represents
the movement of agricultural products. Grain moves more promptly
now than ever before. Wheat is now cut and loaded into the car on
the same day, and it goes forward by rail as fast as they can cut it.
Trainmen and enginemen work when trains run, and they do not
work when the trains do not run. That is understood. Probably
about 80 per cent of the maximum force works pretty steadily all

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the year in the train service. There might be at times from 10 tx>
15 per cent, sometimes 20 per cent, t h a t would be on short time.
They would only run when extra trains required their services. At
such times the engineers might go back to firing, the firemen would
go back perhaps to work in the roundhouse, and the younger men
would be laid off temporarily. That is something that we have not
been able t o change very much in the way of stabilization, because
we must respond to the needs of the public for transportation.
With the passenger service, that condition is different. I t is pretty
well stabilized in any event, and I say " i n any e v e n t " because at
the present time we are running perhaps 2,000,000 more train-miles
than we were eight years ago, and only half as many people riding.
We have been obliged to maintain a minimum service. That does
not fluctuate like freight.
Senator W A L S H . I S that true of all railroads?
Mr. WILLAED. To a greater or lesser extent; I think the decrease
in number of people riding is due to the development of the automobile.
Senator W A L S H . The bus?
Mr. WILLARD. Yes; the bus takes a good many; but as nearly
as we can estimate, the largest taking away from the railroad is by
the individual automobile.
The CHAIRMAN. Before we get to that, could you say what per cent
of the total workers are engaged in the train service?
Mr. WILLARD. About 20 per cent. I f business picks up very
rapidly, we frequently have to put on more clerks and more yardmen, and if it drops off substantially some of them are taken off.
The CHAIRMAN. When you say 20 per cent, that means 20 per cent
of your employees are on trains and engines running back and forth ?
Mr. WILLARD. On trains running back and forth; and the train
service reacts directly with the condition of the business. That we
can't help very much. Here I have a chart showing something of
conditions in the maintenance-of-way department. I n that department considerable has been done to stabilize employment. That line
shows1 the number of men employed, and below is shown the manhours that those men were employed; and these are different years
[indicating on chart]. Now, in that year, 1923, our business was very
good and we employed a large force. A t the end of the year when
the cold weather came on the force was largely reduced. The next
yfear we didn't put on as many. Finally, we get down to this point
last year. W e ran a very uniform force except in J u l y and August
this year.
The CHAIRMAN. W h a t caused that?
Mr. WILLARD. Well, the outlook wasn't very good for business early
in the year and we didn't put the men on.
The CHAIRMAN. But you cut them of?
Mr. WILLARD. Yes; in July and August. We made our budget at
the beginning of the year and we thought our earnings at the end
of the first quarter would be better than they were, but they actually
showed a decrease for that period and we didn't know whether the
last half was coming out the same, so we reduced our force temporarily until we could see what was going to happen, and then we put
them on again. The previous year it went through pretty steadily.



In any event, you can see that this line is less wavy than this line
[indicating on chart]. This represents the total hours that these
men worked. So we did accomplish considerable toward stabilization in that year.
The CHAIRMAN. That just raises the very point in which I think
perhaps the committee is more interested than anything else. That
question of dropping off employees when the earnings go down, or
when there is in sight a depression in business. That seems to be
the most depressing part of all the unemployment situation. You,
with all of your interest in the subject, and we believe it is great,
have adopted the very plan which seems to be the most troublesome
one and the one causing the most suffering. Do you believe that
there is any way that that may be obviated?
Mr. WILLARD. Yes, I think it may be. First of all, we have had
to do what we have done without any assistance by legislation or
any other way.
Stabilization can be promoted more by a state of mind than almost
anything ejse that I can think of, because what we have accomplished
on the Baltimore & Ohio is largely the result of a different state of
mind or point of view. It reflects a conscious desire to improve and
stabilize working conditions in one period compared with a less conscious and impelling desire in another period. This apparent indifference, you might say^ should be criticized and apologized for, and
I do apologize for it, but it reflects the way I had been brought up;
and when I say " I " I think that applies rather generally to a great
part of all those who employ labor. I know that previous to the
war we didn't think it wrong to hire 5,000 or 6,000 new men in the
summer for track work, such as putting in raijs and ties, and do it
as quickly as possible, and then lay them off. We had always been
following that plan, at least to a large degree.
When there was plenty of work throughout the country for these
men so that they could work with us a period and then go somewhere
else and get employment—in the timber, in the harvest fields, or anywhere else, we weren't conscious of imposing a hardship on them by
our practice. Sometimes we took men from Mexico and they would
work awhile in the north and then go back to Mexico. None of us
was impressed at that time with the idea, at least I was not, that
we were doing any particular injustice to any one.
Before the war this matter never had been stressed much by anybody. After the war we were confronted in this country with a
very large unemployment problem. Probably it was most serious
during the demobilization of the soldiers. It was constantly referred to in the papers. We had during Federal control and a short
time thereafter upwards of 2,000,000 men employed on the railroads,
and then we gradually cut the number down to a million six or seven
hundred thousand. It had been reduced three or four hundred
thousand. Not only that, but the number of those who were working
was fluctuating up and down rather violently. That leads us to the
question as to why they were fluctuating up and down. This was due
largely to inadequate earnings at that time. In the transportation
act Congress has stated the rate of return which it thought the railroads should be permitted to earn. Of course, it is generally known
that for the first two or three years after the termination of Federal
control we fell far short of earning the rate of return specified in



the transportation act; in fact, we never have reached it up to this
moment. But the situation was particularly trying through the
years 1921,1922, and 1923. Strikes in the meantime were happening
and the whole economic condition was much upset, and we felt it
on the railroads as everybody else did. In 1920 the railroads were
called upon to move more business, and did move more than ever
before, and then business dropped down very suddenly. I t was
pretty hard to stabilize employment under such circumstances.
Nevertheless, the problem was there, and one of the members of the
Interstate Commerce Commission brought the matter to the attention of different railroad executives. He talked to myself, among
others, and urged that the railroads should see if there wasn't something they could do to stabilize the employment of their men. Well,
the result of that was that the Association of Railway Executives
passed a resolution emphasizing the importance of doing what could
be done to stabilize employment, and a committee was appointed to
investigate the matter and report upon it. It so happened that I was
chairman of that committee.
The CHAIRMAN. What date was that?
Mr. WILLIARD. That resolution was passed on September 18, 1924.
We had been talking about the matter before then, but this was the
first time that we gave it serious consideration. The committee
didn't report for some time. First of all we hadn't any combined
data on the matter and we had to start new reports from all over the
United States because conditions were far from uniform throughout
the country. For instance, in the Northwest it was customary for
the railroads to push their work of maintenance in the spring, and
employ all the men they could use and be prepared to lay them off
in July and August so that they could go into the harvest fields.
That was the usual arrangement in that section. In the South it
was different. Where the Baltimore & Ohio runs it happens to be
'twixt the North and South, with still other conditions. We gave
the matter careful study. This chart was prepared for the committee [referring to chart between pages 8 and 9 in pamphlet entitled
" Stabilization of Employment on the Kailroads," which pamphlet
is appended hereto]. This shows the variation in the earnings of
the roads on the top line, and the bottom line shows the percentage
rate of return on the property investment of the carriers.
The CHAIRMAN. HOW many roads does this cover?
Mr. WILLARD. All the class I railroads in the United States. This
line shows the man-hours worked. It becomes more uniform in 1925
and 1926 than it was during the preceding years. I can leave this
with your committee, if you wish.
The CHAIRMAN. We would be glad to have it.
Mr. WILLARD. I didn't have time to work up such a report as that
for all the roads and bring it up to date, but we did bring the Baltimore & Ohio figures up to date. I may have given you this one
Senator WALSH. I have one.
Mr. WILLARD. This is substantially the same thing.
Senator WALSH. I notice, Mr. Willard, that you seem to have had
fewer employees during the past year, but that the stabilization of
their employment was better than at any other time since 1923.



Mr. WILLARD. Yes, we had fewer employees than we had before
that time.
Senator WALSH. Did your business increase, or drop, during that
Mr. WILLARD. Our business this year was less than it was last
year, but that wasn't wholly the cause of what you are referring
to. I have something here that will show you, perhaps.
Senator WALSH. Was that a general condition with the rest of
the railroads?
Mr. WILLARD. I think largely so.
Senator WALSH. I am trying to find where the Eepublican prosperity is.
Mr. WILLARD. Since you put it that way, I will have to give the
matter further consideration.
JSTow, here is a statement showing the man-hours employed in
the maintenance of equipment department, and the number of men
and the number of man-hours worked have steadily gone down,,
and this year, you will see, it is almost a straight line. Last year
it was pretty nearly so [indicating on chart].
Now, that is accounted for this way: 1923 was the year following
the strike, and we had a lot of deferred maintenance to make up;
also it was a very good year for the Baltimore & Ohio. It was
the largest year in point 01 earnings we have ever had.
The CHAIRMAN. That was during a Republican administration.
Mr. WILLARD. Quite so, during a Eepublican administration,
Our earnings were good and we employed as many men as we
could to advantage. I am referring now to the mechanical department. At the end of the Federal control our equipment was
much below the standard of condition generally maintained in
railroad practice. Then the strike came on and accentuated the
situation—this shows the peak of employment in 1923 in our effort
,to overcome the immediate effects of the strike.
The CHAIRMAN. Those repairs grew out of the war?
Mr. WILLARD. Yes, that is right. As time went on we gradually
caught up and our forces gradually came down. So that to-day
we have seventeen or eighteen thousand employed in our mechanical department, while back here [indicating on chart] one time
we had as high as 28,600; and those men who are working now are
working much more steadily. Now, a number of things have contributed to bring this about, which I will now refer to, if you wish
me to, or I will follow through with this maintenance of way statement and chart. They are two separate things. This stabilization
problem, as I have already said, became acute after the war.
Senator WALSH. Was the motive self-interest, or was it altruism?
Mr. WILLARD. Partly each, perhaps; it certainly was not all selfinterest, because I didn't feel at the time that we would be much
benefited by it directly. I think now that we have been, by keeping a more steady force, and I think that has also tended to reduce our costs, although that wasn't the impelling motive.
Senator WALSH. The reason I asked you was that some of the
employers have argued that it was really from the standpoint of
Mr. WILLARD: I can not say that was the actuating motive with
us in the beginning. Later on I am quite sure we realized, how



(Face p. 82.)



ever, that it was not only a good thing from the standpoint of the
men but was also a good thing from the standpoint of the company.
If I may digress a moment I would like to refer briefly to a
phase of our present economic situation because in my opinion it
has a most important bearing on questions such as the one we have
~been discussing. Within the last two or three generations, chiefly,
there has come about in this country a very important change which
has a far-reaching influence. I refer to the change which was made
possible by and consequently followed the invention of the steam
engine, and which was stimulated largely, if not wholly, by that
Before the invention of the steam engine and for a considerable
period thereafter, industry in this country—and I assume generally
in other countries as well—was carried on in large degree in small
units. I remember when I was a boy in New England the local
shoemaker, working in a room in his own home, for a number of
years made the shoes which I wore. H e was an independent and
self-supporting unit. He owned a small home, surrounded by a small
garden, and by his own labor in his own home, with material
which he purchased himself, he made a living for himself and his
family. Many similar instances might be mentioned. Now our
shoes, speaking generally, are made in Lynn, Mass., Endicott, Jf. Y.,
St. Louis, Mo., and other places where large factories have been
constructed, where large numbers of men and women are employed,
and where shoes are produced in mass quantity at prices much less
than they could be produced for in the old-fashioned way that I
have mentioned above. Consequently the independent shoemaker
has almost ceased to exist.
This economic change which has transformed the business of making shoes and clothing, and in fact nearly all of the things we
consume, has fundamentally changed the status of those who are
so employed from what it wTas before the invention of the steam
engine. Presumably this change has been beneficial to society as a
whole; otherwise it would not have come about; its development
would not have been encouraged; but if society receives the benefits
flowing from such a system, it must also accept the responsibilities
< onnected with such a plan.
What I mean, more specifically, is this: Workers—men and
women—in large numbers have been brought together in different
communities where manufacturing could be carried on in a large way
and with low operating costs. The working people, so employed,
get along all right when business is good and employment steady,
but wThen employment slackens or vanishes altogether, then the workers are left in a much more helpless situation than was the case with
the local shoemaker in the town where I was born, and in my
opinion society as a whole, which undoubtedly is benefited, or thinks
it is, because of our large-scale production, is confronted in times of
depression, and properly so, with the problems growing out of large
numbers of unemployed. Society as a whole can not be indifferent
to the unemployment problem, and the Baltimore & Ohio Kailroad
Co., as a unit oi society, has a responsibility in the same direction.
Formerly, and particularly when I was a boy, there still remained
an undeveloped empire west of the Mississippi Eiver to which the
young boys growing up in the East could always turn in case there



happened to be lack of employment where they lived. I n fact, man}
went West in the spirit of adventure, who might have found employment if they had remained at home. Now, however, that empire has been occupied and it no longer affords an opportunity to
the boy or man temporarily out of employment in the more thickly
settled parts of our country. This also has ser/ed to accentuate
the seriousness of the unemployment question which I am discussing.
For the reasons which I have mentioned, among others, it seems to«
me that those who manage our large industries, whatever the character
of their output may be, whether it be shoes, steel, or transportation,
should recognize the importance and even the necessit}^ of planning
their work so as to furnish as steady employment as possible to those
in their service. Not only should that course, in my opinion, be
followed because it is an obligation connected with our economic system, but I fully believe that such a course is justifiable from the standpoint of the employer, because it would tend to develop a satisfied and
contented body of workmen which of itself would improve efficiency
and reduce costs.
I t is a dangerous thing to have a large number of unemployed
men and women—dangerous to society as a whole—dangerous to theindividuals who constitute society. When men who are willing and
able to work and want to work are unable to obtain work, we need not
be surprised if they steal before they starve. Certainly I do not
approve of stealing, but if I had to make the choice between stealing
and starving, I would surely not choose to starve—and in that respect I do not think I am much unlike the average individual.
The Baltimore & Ohio Railroad, as one of the units of society,,
ought to recognize and carry whatever responsibility rests upon it as
a large employer, and I think, Mr. Chairman, that it was due to
our recognition in part of the obligation which I have just been discussing, that we of the Baltimore & Ohio developed a quickened sense
of the importance of anything which had to do with the stabilization
of employment. I do not hesitate to say that I should personally
feel very much ashamed if it were made clear to me that the Baltimore
& Ohio Co. was not doing all that it could and ought to do, havingdue regard for the interests of the owners of the property while
other employers of labor were fully meeting similar obligations.
The views which I have just expressed concerning this matter are
in large degree held by all employers of labor at the present time.
I n any event I think there is a more universal appreciation of the
obligation resting on employers because of our economic system than
ever before, and this has led to what I may refer to as a changed
point of view, of a changed state of mind, and it is due to that state
of mind, in my opinion, more than to any other single thing that the
efforts have been made in recent years which certainly have been made
by employers in all lines of business, to deal with this matter in a
more constructive manner.
The Baltimore & Ohio Co. has made some progress toward t h e
stabilization of labor as you have already observed from the charts
which I have presented, and the other railroad companies, I think,
have been trying just as hard as we have to deal constructively and
helpfully with this problem, and it may be that some of them have
made even more progress than we have made on the Baltimore &
Ohio, I think the fact that we have all been giving this matter more








and closer consideration than ever before, is due in part to the initiative exercised by Mr. Commissioner Potter who personally brought
the matter to the attention of some of the railroad executives, and to
the keener appreciation which we all have of the importance of
doing what we ccald to correct a condition harmful not only to our
employees but to the industry itself.
You will notice that at the left of this chart it shows that the
largest part of our rail replacement program was carried out during
the summer months, but as you look toward the right on the chart
you will see an increasing amount of rail being laid in the winter
months. During the winter of 1927-28, on account of favorable
weather conditions, we found it possible to put in place nearly the
whole amount of steel which we had ordered for replacement during
the calendar year 1928. Doing this particular kind of work in the
winter enabled us to keep employed during that season a larger
force of men than would otherwise have been necessary and at the
same time relieved us of the necessity of employing a large force
of extra men temporarily during the summer months, as had formerly been the case.
Senator W A L S H . What do those men do in the summer—lay rail?
Mr. WILLARD. They do not lay so much rail in the summer as
formerly, for the reasons I have just been discussing. The Baltimore & Ohio Co. is obliged to apply to its tracks about 2,000,000
new ties each year in replacement of old ties worn out. This work
must necessarily be done when the ground is not frozen, and then
there is other work such as ditching, cleaning right of way, and repairing fences that goes on all through the summer season. I n short
we have found it possible by making our rail replacements in the
winter time to carry a much more uniform force in the maintenance
of way department during the entire year than was formerly the case.
The CHAIRMAN. But the stress of employment, however, seems to
be in the wintertime and that is the time you can do the most good.
Mr. WILLARD. Quite so. This is one of the things that we have
been trying to do—that is, find profitable employment for the trackmen during the winter months, and as I have already explained, we
have been able to accomplish considerable in that direction. The
men in the maintenance department who work on bridges, buildings,
signals, and so forth, are rather steadily employed during the entire
year, although there is some work of that character that can not be
done during severe cold weather.
The CHAIRMAN. That is the time you could put some of these men
at work laying rails.
Mr. WILLARD. Some of them, but not all of them. I said a while
ago that I thought our turnover at the present time was about 10 per
cent, including all classes of men. Of that 10 per cent about one-half
of it—certainly more than one-third of it—is to be found with the
men working on track and buildings, because their work is necessarily out of doors and is affected by the season. About one-half of
our present labor turnover, as near as we can figure it, is due to men
becoming old enough to retire on pension, men who voluntarily lay
off for rest and for other reasons that I do not now recall, but things
over which the company has no control. I should say that our labor
turnover outside of the maintenance-of-way department is considerably less than 10 per cent, perhaps not more than 6 or 7 per cent.



Your second question was " By what means did you undertake
to provide steady employment." I think I have already anticipated
the answer to that question and have pointed out some of the means
which we have made use of. Your third question: " W h a t problems did you encounter in bringing about regular employment." I
have already covered that matter rather fully. We found no serious
oppoisition on the part of our employees. As a matter of fact we
discussed the subject with them and invited their suggestions, and
on the whole they have cooperated in a very satisfactory way. I
might say in this connection that some years ago we developed in
the Baltimore & Ohio service a relationship by means of committees
consisting of representatives of the men and of the management.
These committees meet at frequent intervals and the employees attending are encouraged to make suggestions concerning matters with which
they are familiar, and the result of such conferences has brought
-about, I am certain, a much better understanding between the management and the employees in all the different branches of the service.
Of course it is possible to arrange for a more intimate relationship
in some departments than in others. I t is rather difficult to bring
about meetings between the officers and the men engaged in the
maintenance of way department, because the men are spread out
over so much territory, while it is quite simple to bring together committees of men and management when they are all employed at the
same place or in the same shop.
I n our mechanical department in 1923 we had at one time as many
as 28,600 men working, while at the present time we have about
17,000. Of the number now employed I think We can say that
we have steady employment for about 15,000 of them all the year
round, barring some unforseen occurrence. This will leave, of
course, a margin of about 2,000, and when it is necessary, if it should
b>e, to reduce the force in the mechanical department, we would endeavor to confine the reduction to the 2,000 men last employed. This
arrangement is not completely in effect as yet, but we are endeavoring to work to it. The employees in that department are equally
anxious with the management to have such an arrangement brought
I n short, we are trying to give as many as possible of our men
steady employment the year round and to reduce as much as possible
the number which is likely to be affected more or less by the seasons and temporary fluctuations in business.
Your fourth question i s : " How successful have you been in your
I think I am justified in saying that we have reduced the labor
turnover, running substantially higher than 20 per cent, to a basis
not exceeding 10 per cent at the present time. I hope we may be
able to reduce the percentage still more.
Your fifth question: " To what extent can similar measures be
applied to other plants and other industries ? "
Of course, I am unable to speak concerning other plants and other
industries, and what I have said has had particular reference to
•conditions as they are with the Baltimore & Ohio Co. I assumed
that that was what you wished me to do. There is no reason that
I can think of why other railroads located in the same general



territory as the Baltimore &> Ohio should not be able to accomplish
just as much as we have in the way of stabilization of employment,
and it may be that some of them have accomplished even more than
we have. I have no definite information in that connection. You
will realize, of course, that the railroads located in the extreme
North are working under restrictions that do not exist in the extreme
South so far as climate is concerned, nor even in the territory where
the Baltimore & Ohio is located. I n the northern country, where
heavy snow storms occur,, it is sometimes necessary for the railroads
to employ all the laborers they can secure for days, or even weeks,
at a time, in order to keep the tracks open so that trains may be
operated. These men are employed on a temporary basis, and when
the road is opened their services are no longer needed. I do not
know of any way to deal with that problem other than the way in
which it is being dealt with at the present time. I t is an emergency
We have a somewhat analogous situation occasionally on the
Baltimore & Ohio, but in the summer months, due to heavy rains
and high water, particularly in the Potomac Valley. Occasionally
that river gets high enough from heavy rains to be 6 or 8 feet over
the Baltimore & Ohio main line. When the water goes down
it usually leaves a condition which makes it necessary to employ
large numbers of extra men for a while in order to get the road
quickly in shape for service. When the emergency is past the men
so hired are paid off. That is a condition over which the Baltimore
& Ohio is unabje to exercise any definite control.
The CHAIRMAN. What wages do you pay under those circumstances ?
Mr. WILLARD. The regular wages which we pay to our other trackmen doing the same kind of work. The wages we are paying trackmen to-day, I think, are generally higher than the wages paid for
the same kind of labor by farmers and others employing unskilled
labor in the same vicinity. Our established rate is 42 cents an hour
for common labor working on the track.
The CHAIRMAN. For 8 hours, 10 hours, or what ?
Mr. WILLARD. Forty-two cents an hour for 8 hours. Those wages
were fixed by the labor board, and they have not been changed. We
have good men working on track, and at the present wages they seem
anxious to remain with us.
The CHAIRMAN. YOU mentioned that you were speaking only for
the railroads. Have you any information as to what effects the
ups and downs of manufacturing have on the freight traffic, what
fluctuations in freight traffic are caused by those ups and downs?
Of course, it goes all the way down the line. Lack of stabilization
in industry affects production and that in turn affects the railroads.
Of course, stabilization in manufacturing would promote stabilizing
transportation on the railroads.
Mr. WILLARD. Certainly.
The CHAIRMAN. I n that connection could you speak for any more
than the railroads as to the desirability of stabilizing production ?
Mr. WILLARD. Yes, it is desirable that production in the steel
plants, for instance, should be stabilized as much as possible, and
I might add that the railroads potentially could contribute very



greatly to that end. The railroads as a whole take and consume
as much as 30 per cent of the total output of the steel mills in this
country at certain times. Unfortunately it has many times happened that the railroads have been obliged to go into the market
for other purchases of steel and steel products when business was
at its peak. That is undesirable for several reasons. First, in
such circumstances, the railroads are, of course, obliged to pay peak
prices; and second, it means that the railroads—those that run
through the steel-mill regions—are obliged to compete with the
steel mills for labor. The railroads, using upwards of 30 per cent
of the entire output of the steel mills, can contribute very largely
to the stabilization of the steel industry if their margin of earnings
were such that in times when the steel industry was slowing down
because of other business letting up, the railroads could- anticipate
their future requirements and place orders which would tend to
keep the mills more regularly employed, and then later on, when
outside demands on the steel mills increased, the railroads could
reduce their purchases and give way to their needs.
I t would be a good thing if the railroads were in position generally to anticipate their needs for cars and locomotives sufficiently
so that they could place their orders when the outside demand was
not at its maximum. If the railroads as a whole were always in
position to follow such a policy, I think the effect of it would go
a long way toward stabilizing business, which, of course, would mean
also the stabilization of labor. Does that answer your question ?
The CHAIRMAN. I n part. Also to that could be added orders for
future delivery so that the mills might make up the material for
future delivery if necessary.
Mr. WILLARD. Well, we do that with our rails. We budget all
our expenses and have been doing so for a good many years on the
Baltimore & Ohio, and when we place our orders for steel rails it is
generally with the understanding that the mills will roll them when
most convenient for them to do so.
The CHAIRMAN. I remember meeting you one day down at the
Willard, when we discussed this subject rather informally, and I
remember getting the impression from you that it was considered
quite possible to postpone some of this work to a time when there
was an indication of the falling off of business.
Mr. WILLARD. We have done that. We have been able to do quite
a bit of .that, but you have to be in shape to do it.
The CHAIRMAN. What do you mean by being " in shape " ?
Mr. WILLARD. I mean we must have our plant as a whole in good
condition, because we probably would not be justified in reducing
our force if we had for instance a lot of cars that were in need of
repairs, or engines that were not in condition to run. Assuming that
a railroad has its plant, including tracks, bridges, cars, and locomotives at a high or satisfactory standard of maintenance, then it would
be possible to plan repairs as indicated by your question. To
illustrate: We find it necessary on the Baltimore & Ohio to rebuild
or give very heavy repairs each year to 15,000 or 20,000 freight cars.
W e have had at times quite a large accumulation of cars needing
such repairs, and then if business picked up quickly it was necessary
to send many of them to outside shops in order that they might be



promptly repaired and put in service. We do not do that any more.
We have our cars in such condition that we are not obliged to make
emergency arrangements for repairs. We have at the present time
some 20 or 25 units of 50 men each working on this kind of repairs.
Each unit turns out 15 cars a week thoroughly repaired. That would
be 1,200 cars a month if 20 units were employed and that rate of
work kept up throughout the year would very nearly keep our equipment at the proper standard. If cars needing heavy repairs show
a tendency to accumulate faster than they can be repairetl we can
easily establish a few more units. Our effort, however, is directed
towards keeping a regular force satisfactorily at work throughout
the year.
The CHAIRMAN. YOU might also, when we are prosperous, postpone
construction of new machine shops and power plants by rerouting
some of the freight traffic.
Mr. WILLARD. Yes, that also could be done, provided a road was
in well-balanced condition concerning equipment, repair facilities,
and so forth.
The CHAIRMAN. Perhaps I didn't make myself quite clear. For
instance, there has been some publicity about electrification of the
Pennsylvania Railroad.
The CHAIRMAN. I t may

be desirable to do that when the plans are
ready, or, in the interest of stabilization of employment, it may be
well to postpone-that or any bridge work, or any work, when we are
at the peak of employment, until there is a slackening of employment.
Mr. WILLARD. Yes; that would naturally come within the limits
of such a policy as I have been discussing. The Baltimore & Ohio
spends approximately $2,000,000 a year for bridge replacements, and
inasmuch as good practice makes it necessary to keep a substantial
margin of safety in all bridges, work of this character can be, within
reasonable limits, deferred or expedited as you suggest.
I n railroading there are at least three important if not controlling
factors that influence- stabilization of employment. First of all is
the matter of point of view. There must be a real desire to do all
that can be clone in the direction of stabilization, and that desire, if
converted into action, will frequently yield surprising results. The
influence of the point of view is reflected in the joint action of the
railroads concerning stabilization of labor, to which I have already
made reference; and in addition to a definite desire to promote
stabilization there must also be the means and opportunity for doing
it. By this, I mean in the case of the railroads that there must be
such a margin of net earnings as will enable the companies to continue
their maintenance programs, for a time at least, even though there
should be a temporary reduction in business. All too frequently in
the past the railroads hav& felt obliged to immediately reduce their
expenditures in all directions whenever the business snowed a tendency to fall off.
The transportation act, 1920, under which the railroads are now
operating, if fairly interpreted and applied, will in my opinion
ordinarily permit the railroads to have such a basis of rates and
earnings as will enable them to adopt such policies as I have been




discussing. As a matter of information, I perhaps ought to sav
that regardless of the assurances contained in the transportation
act, the railroads as a whole in the United States have not been
able in any single year since the act become effective to earn the rate
of return fixed by the Interstate Commerce Commission upon the
total valuation, also established by the commission itself with
actual additions since; and, of course, the deficit would be much
greater if it were calculated on the basis of the property investment
of the carriers as shown in their accounts.
Senator W A L S H . H O W near does the Baltimore & Ohio come to
Mr. WILLARD. During the period that has elapsed since the end
of Federal control, the Baltimore & Ohio has failed to earn the
return specified in the act and by the commission by more than
The CHAIRMAN. D O you know of any case in which the railroads
did agree with the commission as to what the railroads were worth?
Mr. WILLARD. NO. I do not know of any such case. I think it
would be a good thing if the representatives of the individual carriers could negotiate with the commission and endeavor to arrive
at an agreed value. I know that the Baltimore & Ohio Co. is not
seeking to obtain a higher valuation than it is justly entitled to, and
we must assume that the representatives of this Government, members of the Interstate Commerce Commission, are equally honest.
That being true, it should not be difficult, or if difficult it should
not be impossible, to reach an agreement. Unfortunately, however,
such a course seems impracticable, for reasons which are perhaps
obvious and need not be mentioned in a discussion such as this.
Senator W A L S H . Of course, the value fixed by the Interstate Commerce Commission is considered by the railroads as unfair?
Mr. WILLARD. Yes. I think as a whole the railroads consider that
the valuations so far fixed by the commission are less than they fairly
ought to be, but I repeat that even upon the values which the commission itself found for rate-making purposes in 1920, the railroads
in the United States as a whole have failed to earn the return specified by the commission, even on that valuation, by something like
$1,900,000,000, covering the entire period.
The CHAIRMAN. D O you assume that the traffic would have stood
that difference of a billion nine hundred million ?
Mr. WILLARD. I am inclined to believe that the traffic could have
stood rates necessary to yield that return, but whether it would
have been wise to charge such rates in another matter. You ma;y
perhaps recall that the railroads voluntarily reduced many of their
rates, particularly on farm products, 10 per cent in 1923, although
at that time the carriers were not earning upon their property values
one-half the rate of return specified by Congress itself. I n general
terms, I think the railroads are fairly entitled to earn a fair rate
of return upon the fair value of their properties devoted to transportation purposes in the interest of tlje public. That is the measure
in general terms set up by Congress itself, and it seems to me it
would be very difficult for anyone to sustain the argument that the
railroads ought not to be permitted to earn a fair return upon the
fair value of their properties.



The CHAIRMAN. I t is practically a theoretical conclusion that this
rate might be earned under any and all circumstances, just because it
is the measure set up by Congress.
Mr. WILLARD. I have not looked at the matter in quite that light.
After all, what Congress said was this: That the commission should
fix rates so as to yield as nearly as may be a fair return, recognizing,
of course, that that was t h e only practicable way in which the matter
could be handled. But evidently Congress expected that at times
some if not all the railroads would earn more than a fair return, and
so provided that one-half of all that any carrier might earn above
6 per cent of the value of its property should be returned to the Government. I t seems to me that that fact of itself indicates that Congress expected the return would vary from time to time, and that an
effort would be made to permit the railroads to earn a fair return at
all times, as nearly as that might be done.
The CHAIRMAN. D O you think agriculture could stand its share of
this increase of billions that you say you should have earned? Do
you think agriculture should have stood it ?
Mr. WILLARD. Of course, the shortage of over one billion dollars
which I referred to represents an accumulated shortage extending
over a period of seven or eight years. Contrary to the general belief, rates paid on agricultural products! to-day are below the average
of all the rates charged by the railroads, and I can think of no reason
why agriculture should not be able to pay, and required to pay, rates
as high as the average, although it is a fact that ever since I have
been acquainted with the matter, agricultural rates as a whole have
been much below the average, considered from the standpoint of
their profitability, and generally below the average when considered
on the basis of the rate paid per ton-mile. One reason, at least, why
it has been so difficult for the Interstate Commerce Commission to
establish what the Hoke Smith resolution evidently expected would
come about is, I repeat, because the rates on agricultural products are
already generally below the average, and clearly could not be made
lower unless something else above the average were made higher, inas much as the total earning from all the rates have not yielded the
fair return contemplated in the act. I have here a chart snowing the
relative earnings of the different commodities handled by the Baltimore & Ohio Co., and you will find on this chart> confirmation of the
statement which I have just made concerning rates on agricultural
products and their comparisons with rates on other commodities.
Senator WALSH. What general per cent of increase would be required to meet the provisions of the law based upon the present valuation by the Interstate Commerce Commission ?
Mr. WILLARD. I can not definitely answer that question. I can say
this, however, that the increase needed would be very small. As I
recall, all of the railroads in 1927 fell short some $200,000,000 of
earning the return fixed by the commission.
Senator W A L S H . W h a t per cent of increase in rates would that be?
Mr. WILLARD. If my recollection is right an increase of 4.3 per cent
on the rates of all freight traffic handled would have yielded that
Senator WALSH. Because the volume is so great?
Mr. WILLARD. Yes; because the volume is so large.



Another element has come into the situation since the termination
of the war. Previous to the war, and for a long time, the business
handled by the railroads had shown a very satisfactory increase year
by year, reflecting, of course, the general increase in the business of
the country. Since the, war the business of the railroads has not
shown the same rate of increase as before the war; in fact the railroads have shown very little, and some of them no increase at all
since the termination of Federal control. If the total business of the
railroads was increasing to-day as rapidly as was the case before the
war and if the present rates were permitted to remain in effect, the
railroads would undoubtedly be able in a short time to earn the fair
return fixed in the act without any increase of rates, as has been
suggested. As a matter of fact, however, freight rates are constantly going down. That was true before the war and it has been
true since the war, and that tendency is likely to continue. Some of
these reductions to which I have referred have been ordered by the
Interstate Commerce Commission and some have been made by the
railroads themselves in response to commercial conditions. My" point
is that reductions actually have been made and experience of the past
justifies the belief that the tendency of railroad rates will continue
downward. Such a situation could only be met and offset by constantly increasing business or by reduced operating costs with the
same volume of business.
The CHAIRMAN. Assuming that you didn't have that traffic at all^
and there hadn't been any reduction in rates, would you have been
worse off or better off ?
Mr. WILLARD. I am not quite sure that I understand your question,
but of course some business at some rate, provided the rate was sufficiently high to yield something above expenses, would be better than
no business at all with a higher rate.
The CHAIRMAN. SO that even if you didn't earn as much as you
thought you ought to have earned on that tonnage, you would be
worse off if you hadn't had the traffic at all ?
Mr. WILLARD. I am inclined to think that statement is true. Ordinarily and within certain clearly established limits, it would probably be better to carry freight at lower rates than not to carr}^ it at
all. My reason, Mr. Chairman, for referring to this phase of the
railroad problem, that is to say, the matter of earnings, is because
it should be recognized that there is a very definite relation between
earnings of the railroads on the one hand, and the ability of the
railroads on the other to maintain service, stabilize labor and equalize
their purchases so as to stabilize industry as far as may be possible.
If the carriers were permitted to earn the rate of return which
Congress obviously considered fair—otherwise the transportation
act would not have been written as it was—I have no doubt that the
railroads would be able to do much more than has been done in the
way of stabilizing business by a more equal distribution of orders.
The railroads in some years have used as much as 30 per cent of all
the steel manufactured in this country, over 28 to 30 per cent of all
the soft coal produced, from 25 to more than 30 per cent of the lumber manufactured and, as I recall, some 15 per cent of the copperproduced. The railroads are large users of material and on that



account can contribute substantially toward the stabilization of business.
I do not think I have anything further to suggest at this time.
The CHAIRMAN. Have you any questions you want to ask, Senator
Senator W A L S H . This is a little aside from our discussion here. I
want to inquire about your employees' magazine. I t impresses me
as being a great influence for promoting the morale of the employees.
Mr. WILLARD. I hope it is. I t is costing us $60,000 or $70,000 a
year to publish it, and we justify that expenditure in our own minds
on the ground that it leads to a better understanding and promotes
Senator W A L S H . I t has impressed me as one of the best things I
have ever seen in America for developing and maintaining a high
standard of morale.
Mr. WILLARD. We feel that way about it.
Senator W A L S H . H O W about the insuring of your employees ?
Mr. WILLARD. The Baltimore & Ohio Co. has had in"effect for
many years a plan designed to encourage thrift and to provide a certain measure of insurance for its employees. If you desire, I can
leave here the 40th annual report of our relief department. We have
no outside group insurance.
Senator W A L S H . I t doesn't provide for unemployment relief ?
Mr. WILLARD. N O ; just old-age retirement.
Senator W A L S H . All the railroads have that system, more or less?
Mr. WILLARD. N O ; I think not. The Baltimore & Ohio was one
of the first to adopt a system of that kind. I t may interest you to
know that we have to-day in our custody over $18,000,000 deposited
by our employees, upon which we pay them 5% per cent interest.
Senator W A L S H . H O W do you invest the money ?
Mr. WILLARD. At the present time over $11,600,000 is loaned out
to our employees at 6 per cent per annum for the purpose of building
homes. We encourage our employees to buy or build homes and we
do what we can to assist them in that direction. If they become
sick or temporarily out of employment because of depressed business, we assist them in carrying their payments. Since this arrangement was inaugurated 46 years ago, our employees have bought
or built homes aggregating in cost more than $60,000,000, against
which there is outstanding at this time about $11,600,000, which they
are paying off from month to month.
Senator W A L S H . All these opportunities promote thrift which is
encouraged in your magazine; it brings it home to them.
Mr. WILLARD. Yes; I think it is a good thing. I think our relief
department is a good thing. I n effect the men themselves each
month contribute a certain amount of money from their wages to
be held and used for relief purposes if and when necessary. I t might
be said that each of them puts a certain amount of money in the
hat each month and the company holds the hat. I t costs the company
about $1,000 a day to hold the hat. The railroad company takes care
of the money, pays all of the administrative purposes, and accounts
to the employees for all the money which they pay in. Every penny
put in by employees goes back to them, with no deductions whatever
tor administrative purposes.



The CHAIRMAN. Mr. Jackson, you have heard the statement of Mr.



The CHAIRMAN. Can you add anything in the way of what you
have done toward stabilizing employment on the Union Pacific
system ?
Mr. JACKSON. I have heard Mr. Willard describe, with a great deal
of interest, the situation on the Baltimore & Ohio, which is in general
quite similar to that on the Union Pacific system, and I shall endeavor to answer the questions which you have asked in writing of
our president, Mr. Gray, who conveys his regrets at not being able
to come personally before the committee at this time.
We have given this problem of stabilizing employment in the railroad industry a great deal of study and consideratipn.
I t is a
problem of considerable magnitude, especially on the Union Pacific
System where the spread between the maximum and minimum
monthly income during the year is over 75 per cent. There is also a
considerable fluctuation in revenues from one year to another. The
problem itself is not only different as between the railroad industry
and other industries, but between individual railroads as well.
Our study of the situation on the Union Pacific lines showed that
the chief factors of fluctuation are instability of income and traffic,
and seasonal and climatic conditions. These factors are more or
less constant so far as the Union Pacific system lines are concerned ; in fact the fluctuation in income was somewhat greater in the
year 1927 than in the year 1923 when the present plan was adopted.
The abnormal conditions existing prior to that year made adherence
to a definite program of stabilization practically impossible.
Expenditures are necessarily relative to revenues, and during
periods of lean earnings reduction in expenses must be accomplished
in a measure at least by reduction in force. Nevertheless, our efforts
to minimize irregularity of employment have met with gratifying
success. The results we have accomplished have been achieved by
distributing as far as possible over light traffic periods heavy repair
and maintenance work—which can be done advantageously'in such
periods. This not only tends to stabilize forces but enables us to
prepare for the peak period of traffic when every available locomotive
and car is required.
Seasonal and climatic conditions are largely controlling in the performance of roadway maintenance work. They affect equipment
maintenance forces to a lesser degree. I n the territory served by the
Union Pacific extending from the Missouri River to the Pacific coast,
the weather varies from extreme heat in the desert and southern sections to extreme cold in the Middle West and Northwestern States.
Not all of the classes employed in the railroad industry are subject to instability of employment. Only those classes working
directly in connection with train operation, which is governed entirely by train conditions, and forces engaged in maintenance work
affected both by traffic and climatic conditions, are subject to violent




The professional and clerical group' which includes technical and
office forces, and the transportation group of other than train and
engine employees, that is, train dispatchers, agents, telegraphers, i n spectors, and station forces, enjoy practically regular employment..
These groups comprise approximately 28 per cent of the total. Train
and engine service employees are directly affected by the volume of
traffic and provision is made under their working schedules wTith the j
company for certain mileage regulations, under which forces are
increased or reduced when mileage fluctuates beyond specified
The maintenance forces comprise approximately 56 per cent of
the total. There are two major groups, one engaged in the maintenance of the right of way and structures and the other in the maintenance of locomotives and cars. Budgets are prepared quarterly
each year covering maintenance expense. Yearly budget is also prepared covering addition and betterment work to be undertaken during
the year. Kail renewals, tie renewals, overhauling of power and
equipment, and other work which can be anticipated is reviewed and
spread out over the yearly period to the greatest extent possible consistent with undertaking the work during suitable weather and the
requirements in connection with heavy traffic during the fall.
Advice of projects that are approved is given sufficiently in advance of the first of the year to permit of spreading the work out
over light traffic periods to the maximum possible extent. I t is not
practicable to renew rail, ties or ballast during the extreme cold
winter months, nor is it practicable to do outdoor painting during
such months. The range in full-time positions of those classes regularly employed in maintenance of way work in which the greatest
amount of instability occurs is reflected in a statement which I have
had prepared and which I will read into the record at this point
[reading] :

in full-time


Union Pacific



of w\ay


Per cent of range

Year 1923

Masons, bricklayers, plasterers and plumbers
Gang or section foremen
Track and roadway section laborers



Year 1927


Now, M.v. Chairman, you understand, of course, that addition
and betterment or new construction work must at times necessarily
involve temporary employment. That can not always be avoided.,
The fluctuation in such forces does not represent unemployment
for the class of individuals affected. These forces are comprised
largely of men recruited from other sources within the industry o r
from other fields of employment to which they usually return upon




completion of the temporary work for which they are engaged by
the railroad; in fact, it is desirable that these forces be released
as far as possible during the harvest period or at such times as their
services are required in the agricultural field.
While forces in the maintenance of equipment department are
not affected as seriously by climatic conditions, they are affected to
a very considerable extent by traffic conditions. Notwithstanding
our budget practice under which heavy repair work is performed as
far as possible during periods of light traffic, any appreciable falling off in business affects the amount of work to be performed.
The extent of repairs and maintenance depends largely upon the use
of the equipment, and if any substantial amount of it is entirely
out of service or used to a comparatively small extent over a given
period of time, less repair and maintenance work will be required.
Under our stabilization plan, a definite program of heavy repairs
is formulated prior to the year in which the work is to be done. I n
this manner heavy repairs are distributed throughout the year and
to the fullest possible extent concentrated in the light traffic months.
This not only enables us to put the power in condition to handle
heavy traffic movement but also to alternate the forces between heavy
and light repair work. We have also inaugurated a car-building
program conducted in accordance with a definite specific program
that is followed throughout the year without regard to fluctuation in
traffic. The range of full-time positions in the mechanical department in the years 1923 and 1927 is shown in another statement which
I should also like to read into the record [reading] :
Range of full-time positions, Union Pacific system; maintenance of equipment
and stores
Per cent of range

Year 1923

Boiler makers
Sheet-metal workers.
Passenger-car men—
Freight-car men






Year 1927

That shows a very reduced fluctuation, does it


The CHAIRMAN. Have you any exception to make to Mr. Willard's
remarks as to the ability of the railroads to stabilize ?
Mr. JACKSON. N O ; Mr. Chairman, I followed Mr. Willard very
closely and I have no exception whatever to any part of what
he said.
Senator W A L S H . I suppose you agree with him in his references
to the Interstate Commerce Commission and his reference to the
present law?



Mr. JACKSON. Yes; Senator, I think they would apply to railroads in general.
Now, Mr. Chairman, the statement I just read into the record
represents practically regular employment for most of the classes
of employees shown therein, and the situation for the year 1928, for
which the figures are not yet available, shows an even greater
improvment over 1927.
I n addition to the analysis of work in the maintenance department and the steps taken to stabilize forces with the result outlined
above, we have also cooperated to the fullest possible extent with
shippers in stabilizing the movement of traffic. Kecognizing that
the purchase of materials and supplies during periods of light traffic
stimulates industrial activity and results in increased traffic movement, railroad purchases are made as far as possible in periods of
light traffic, not only to take advantage of more favorable market
conditions but to provide for their movement when equipment is
not required for commercial use.
Arrangements have also been made for the movement as far as
possible of nonrevenue traffic during periods of light revenue traffic.
Commodities such as coal for current consumption and certain kinds
of material and supplies must necessarily move at all times, but
where possible, lumber, ties, ballast, and rails are distributed during
periods of light traffic.
The CHAIRMAN. Have you anything to add in the way of suggestion to what Mr. Willard has said?
Mr. JACKSON. I haven't anything to add, Mr. Chairman, other
than that I might emphasize what we consider a real necessity in
the solution of this important problem, that the railroads and other
industries study the situation and be willing to carry out or be sold
to the idea of stabilizing their affairs.
The CHAIRMAN. I n other words, it is the will to do, isn't it?
Mr. JACKSON. The will to do; yes, sir. I n our locomotive department prior to 1923, during the months of July, August, September,
and October we would have our shops full of men—all of the
mechanics and employees we could get. We would have our shops
full of locomotives and those men repairing them. We have devised
a system, and are gradually improving it, whereby we distribute
that work more evenly throughout the year. We schedule our locomotives for shopping, for the heavy repairs, for the leaner months
when our business is not so heavy, or for months when the locomotives are not so much needed to move the business. We are following
that plan, and whtn our work in the general repair shop decreases we
transfer those employees to our roundhouse where they take care of
the running repairs, thereby stabilizing the general force.
(The following material was submitted by Mr. Jackson for the
consideration of the committee:)

Number of full-time positions, Union Pacific system; maintenance of equipment and stores


N u m b e r of full-time positions

Per cent



















YEAR 1923

Passenger-car men...
Freight-car men
Sheet metal workers.
























YEAR 1927
Boiler makers.__
Freight-car men














Source: Compiled from data reported by the individual system lines on I. C. C. Wage Statistics, Form A, according to method prescribed by committee on stabilization of
Employment, Association of Railway Executives—i. e., multiplying the number of working days in the month by the straight-time hours per day and dividing the product into the
total hours paid for.
OMAHA. December 15, 1928.



Total operating revenues, Union Pacific system
Year 1927

Year 1923




$15,433, 610
16,389, 949
21,577, 642


Total for year
Monthly average

211, 318,465
17, 609,872






$13, 742,564
13,285, 092
20, 210, 546



203,891, 622
16, 990,969


Omaha, December 15,1928.

(The following is taken from the agreement between the Union
Pacific lines and the Shop Employes' Association, Union Pacific
system, and refers to the accepted policy of the company toward
stabilizing employment:)


The work performed by the classes of employes subject to this agreement,
being governed by fluctuations in traffic and seasonal conditions, this article
is designed to provide a means of cooperation between the employes and
management to reduce to the minimum the increases and decreases in the
number of employes, by regulating the bulletined hours of assignment.
(a) When necessary to make temporary increase in or reduction of expenses
at any point or in any department or subdivision thereof, either forces, hours,
or both, may be increased or reduced, subject to the provisions of article 12
(a), provided:
1. That in no case shall the aggregate of the bulletined hours of the week
be less than 40 or the days per week less than 5, except when reduction in
expenses can be met only by closing the shop, and/or weeks in which specified holidays occur by the number of such holidays.
2. That the maximum number of bulletined hours per week on 6-day assignments shall not exceed 54, and on 7-day assignments shall not exceed 63.
3. That the bulletined hours of assignment shall be so regulated that the
average hours per day for the working days in a year, of employes who are
regularly employed, shall average eight as nearly as possible, except as it
may be affected by mutual arrangement between the officers and committees
at point affected.
(&) Before the force or working hours in any shop, department, or subdivision thereof, is increased or reduced, the local representatives of the
employes affected will be consulted in order to arrive at a mutual understanding
as to whether the increase or reduction shall be made in force or hours, or
by an increase or reduction in both force and hours: Provided, That employees
who have been in the service less than 90 days shall be laid off before hours
are reduced, except that sufficient number of such employees may be retained
in any one craft as are necessary to maintain balanced forces.
(c) In the adjustment of forces, employee will take the rate of the job to
which assigned, seniority as per article 4 (a) to govern.
The CHAIRMAN. We thank you very much, Mr. Jackson. The
committee will adjourn until to-morrow morning at 10.30 o'clock.
(Whereupon, at 12 o'clock noon, the committee adjourned until
to-morrow, Tuesday, December 18, 1928, at 10.30 o'clock a. m.)


T U E S D A Y , DECEMBEE 18, 1928

Washington, D. G.
The committee met, pursuant to adjournment, at 10.30 o'clock a. m.,
in room 412, Senate Office Building, Senator James Couzens presiding.
Present: Senators Couzens (chairman), Copeland, and Walsh of
Present also: Dr. Isador Lubin, of the Institute of Economics,
Washington, D. C , special assistant to the committee.
The CHAIRMAN. Mr. Loree, will you please give the stenographer
your name and address and state what company you represent'(
Mr. LOREE. James T. Loree, vice president and general manager
of the Delaware & Hudson Co., Albany, N. Y.
The CHAIRMAN. We will be glad to have you proceed in any way
you like.
Mr. LOREE. I have a statement prepared, from which, if you allow
me, I will read, and will be glad to answer any questions.
The problem of stabilizing employment has been the subject of
study by the management of the D. & H . for a number of years. In
general, it has been the broad subject of employment and, specifically,
how on a railroad property of some thousand miles of road, some
10,000 to 15,000 men might day in and day out be assured of steady
The development of the industrial system consequent to the advance
in facilities of communication has revolutionized the old economic
order. The .economic change has reached further and been effected
in a shorter time than in any other period of the world's history.
Its effect has been greatest upon each of the three fundamental elements of industrial life—management, capital, and labor.
Other employees, like the individuals of management, desire, and
rightfully expect, continuity of employment, good wages, and good
conditions under which to work.
The requirements of a railroad, unlike most industries, make necessary continuous operation, and while in times of depression a certain
curtailment of service is possible a certain amount must be maintained
throughout the 24 hours of every day in the year.




The railroad employees are divided into 6 major classifications,
subdivided into 148 minor classifications.
Major classifications.—Executives
and their assistants; professional and clerical; general; maintenance of way and structures;
maintenance of equipment and stores; transportation employees.
Our problem existed in regard to 66 per cent of the employees,
some 10,000, working in the maintenance classifications. *
I t was early recognized that one of the most serious hardships for
a man with a family was to lose his job and have to find a new one,
but the realization that the railroad sustained a loss, both financially
and in its morale, came much later.
I t will be noted in chart No. 1 that in the year 1920 the maintenance of way employees numbered: Maximum, 4,200; minimum,
2,750; variation, 145. I n 1922: Maximum, 4,200; minimum, 2,400;
variation, 1,800.
Maintenance of motive power, chart No. 2, 1920: Maximum, 3,310;
minimum, 3,265; variation, 45. I n 1922: Maximum, 3,112; minimum, 2,346; variation, 766.
Maintenance of other rolling stock, chart No. 3, 1920: Maximum,
2,540; minimum, 2,121; variation, 419. I n 1922: Maximum, 2,535;
minimum, 1,278; variation, 1,257.
These figures illustrate the irregularity of employment as to numbers, but do not indicate the further irregularity caused by business
depression when, for periods ranging as high as 30 days, shops were
closed and the track forces only used to patrol and replace broken
ties and rails.
A study of this situation disclosed that business depression and the
seasons caused at least a part of this irregularity. I n the last quarter
of a century in only one year did traffic increase more than 25 per
cent and in only one year did it decrease more than 20 per cent.
These major disturbances seem to occur at approximately 20-year
intervals with minor depressions at 5-year intervals. T h a t in our
north country, from the middle of October to the 1st of April, replacement of ties and ballast is impossible.
The construction of new yards, bridges, and main tracks, the construction or reconstruction of shops, and items of similar nature
tended to necessitate new forces to do the work, and such forces were
disbanded as a particular job was finished.
An examination of our experience indicated that there was a loss
in the full working time of the year, by sickness, 3.14 per cent;
accidents, 0.16 per cent; vacations, 1.94 per cent; or a total of 5.24
per cent, a loss greater than the total effect of the minor depressions,
and equal to about one-quarter of the most violent depression.
To meet the problem of affording steady work throughout the
year, a policy was laid down of:
First. Budget for the year, both for maintenance and for improvement of the property, being a part of a 5-year program—this program to be revised annually.
Second. Nonrevenue freight—i. e., fuel, rails, ties, ballast, and other
company material—to be moved when revenue traffic is light because
of seasonal variations. Thus, our rail is bought in September, delivered in November and December, and laid in January, February,
and March.



The CHAIRMAN. Would you mind if I interrupted you there for
a moment?
Mr. LOREE. No, sir.
The CHAIRMAN. Previously

in your statement you have said that
a part of the irregularity of employment was caused by the fact that
it was impossible to place ties and ballast at certain seasons, because
of the temperature, and so on, I suppose.
Mr. LOREE. Yes.
The CHAIRMAN. Does that effect the rails, too ?
Mr. LOREE. NO ; we lay rails at all times.
The CHAIRMAN. That can be done without disturbance

on account
of the season?
Mr. LOREE. Yes; that is affected by two things. First of all, we
know that in weather that is moist, like the damp weather in the
early part of March, there is a certain natural lubrication that takes
place that reduces the wear, because the rail is laid tight gauge; consequently, by putting the rail down and putting in the ties, by April
1—all the ties must be in by the 1st of July—our new ties are only
spiked once, whereas otherwise we have to go back and regauge and
put two spike holes in a tie. By this method you only have to spike
the tie once; so that the new establishment of employment and
management has turned out successful from a management standpoint.
Third. An elastic day, ranging from 8 to 10 hours, dependiii£ upon
business conditions. Forces to be maintained until less than 48 hours
per week work is provided, and no new men hired until 60 hours had
to be exceeded.
Fourth. Work arranged so that program covered 12 months of the
Fifth. A group insurance against the major hazards of life—death,
sickness, accident, total disability, dismissal.
Sixth. Careful employment and exchange of employees between
Seventh. Graduated wage scales: (a) Piece-work, (h) Skill and
length of service.
The detailed execution of such a policy developed at once, and continues to develop, new problems.
We had a force built up upon the old plan, too large to fit the new
plan, and extra work had to be provided in some cases and men
placed in other departments.
Seasonal work, such as large building projects and road construction, offering for a short time employment at higher hourly wages,
interfere greatly with the plan of step rates.
The anthracite strike of September, 1925, caused a most serious
situation, and we quote from the letter addressed by the president of
the company to all employees, in part as follows:
In the experiment we are jointly conducting to stabilize employment conditions, the burden of the first real test has fallen upon the management. They
feel no cause to regret having frankly faced their responsibilities. With the
resumption of business our bad-order locomotives are not more than 11 per cent,
and the bad-order cars 3.6 per cent, so that the growing traffic can be cared for
without embarrassment. The forces are filled with men who are acquainted
with each other and with the practices of the company. I should like to emphasize that this is only one indication of the great importance to the employees
that the corporation in whose service they are should be kept prosperous and
in a high 'state of credit, which alone make such action possible.



This adherence to policy entailed the immediate expenditure of
$1,900,000, whereas under the old plan such expenditure might have
been deferred until business improved.
Men growing old in the service slow up in many of the more
arduous jobs and must be placed elsewhere.
I n line with a program of concentrating locomotive and car repairs at fewer shops, we were obliged to absorb some 400 men.













Feb, 2to. Apr.



Aug. Sept. Oct.

N O T . Dec.




The 10 per cent of the employees of a low level of mental efficiency
incline to take holidays whenever they choose, wasting much time
loitering, unwilling to accommodate themselves to a state of discipline.
Fortunately, we encountered to only a small degree the usual distrust that innovations usually experience.
Only to a degree have we been successful.
I t will be noted in chart No. 1 that in the year 1924 the maintenance of way employees numbered, maximum, 3,400; minimum,



2,625; variation, 775—1926, maximum, 3,200; minimum, 2,750; variation, 450—1928, maximum, 2,725; minimum, 2,475; variation, 250.
Maintenance of motive power, chart No. 2 : 1924, maximum, 3,021;
minimum, 2,670; variation, 351—1926, maximum, 2,587; minimum,
2,500; variation, 87—1928, maximum, 2,315; minimum, 2,052; variation, 263.


« 8

6 i


o 3

The CHAIRMAN. At that point let me ask, why did the variation
jump up from 1926 to 1928?
Mr. LOREE. Because men had left our employment. I n order to
get our forces normalized or stabilized as men have left employment,
their positions have been abolished; so that that is not turnover,
that is simply vacant positions that we will never fill again.
The CHAIRMAN. S O that you are getting along with 2,052 men with
the stabilized forces?



Mr. LOREE. Yes. You see, we had all these men who were with us
from the old plan, and we did not want to turn them adrift, so that
they were kept, and we made as much work as we could for them,
or put them elsewhere; and as they voluntarily left the service or
died, their positions were never filled again. We are getting down
to a stabilized force now.

I 1 I I 1 I I I 8 8













• —

• —





Maintenance of other rolling stock, chart No. 3 : 1924, maximum,
2,070; minimum, 1,796; variation, 274—1926, maximum, 1,799; minimum, 1,788; variation, 11—1928, maximum, 1,614; minimum, 1,480;
variation, 134.
The CHAIRMAN. I assume that the same explanation applies to






































(Face p. 107.)

No. 1






CHART N O . 5



1 1 U 0 S 0 N




i Hotno















29193—29. (Face p. 107.) No. 2










Mr. LOREE. Yes; during the last year on account of business conditions, more men stayed in the service, and so those positions did not
become vacant. This year more men have gone elsewhere for work,
so that more positions were abolished.
Charts Nos. 4 and 5 show the working hours during these years,
indicating that for all employees in the locomotive and other rolling
stock departments, the hours per week range between 54 and 32,
with no shutdowns.


» u
u o t>.
m a n




>-* *o





•* in
u o




C **


• »











^ ^



• * *
* W 1
« 3






iH * 1

E ^m* ^W^ ^ ^ ^








+» •»



I n other words, the minimum number of hours with those employees I have just enumerated was 32, and the maximum was 54.
The CHAIRMAN. Yes; it is very clearly indicated on the chart,
what was done.
Mr. LOREE. Yes. I n times of good business, the men have participated in same by greater earnings.
Our force of .long-service employees is increasing, as indicated by
chart No. 6, showing the effect of*step rates for laborers. On May



1, 1922, we had 2,117 employees with less than six months' service;
on November 1, 1928, 714.
Fifty-nine per cent of our employees have completed five or more
years of service:

or more
or more
or more
o r more
years or


4» 516
2, 647

Our policy, with all the changes made necessary thereby, has
entailed payment in six years of dismissal insurance on account lack
of work to only 50 employees.



h'iAirrm.j;c~£. c? WAY DEPARTMENT

Total "urr. v er of Track Ties Used




Tons or Hail Uaod



The CHAIRMAN. Pardon me; are you going to give us something
that describes the dismissal of employees?
Mr. LOREE. I thought you would perhaps develop that by questions.
Mr. LOREE. I n order

to indicate the variations of business met
during the period, chart No. 7 shows the gross ton-miles and total
freight car-miles, and as a measure of work performed, chart No. 8
gives material charges for repairs to locomotives and freight cars,
and chart No. 9 shows ties and rails used, the two major items of
maintenance and wray material.
That our policy in whole or in part can be applied to other industries depends upon ihe conditions peculiar to the industry. I t is.
however, felt that a studv of their cases might indicate, in their

CHART N O . 7




















(Face p. 108.)

No. 1


D B L J i U a E



































_ _



\MA hv



(Face p. 108.)

No. 2





efforts to stabilize employment, the adoption, in whole or in part,
of the policy outlined herein.
Mr. LOREE. I have tried to keep to the questions that were specifically raised in your letter, Mr. Chairman.
The CHAIRMAN. Yes. Mr. Daniel Willard, president of the Baltimore & Ohio Railroad, was before the committee 37esterday, and
he testified that this was largely a state of mind that the employers
had to get into, for the development of the standardization or stabilization of employment, before we could get action or devise means
for doing that. I suppose you agree to that ?
Mr. LOREE. I think it is a state of mind; that he frankly faces his
own loss, if he does not; a financial loss, which is occasioned directly
and indirectly by the lowering in the morale of his people.
The CHAIRMAN. In other words, it is good business practice to
have a consciousness developed in that direction?
Mr. LOREE. We think so.
The CHAIRMAN. Did you say what you meant by this dismissal
insurance ?
Mr. LOREE. We have a group insurance that covers the employees
in the service. That insurance is against sickness, accident, and
total disability. We give all the men in the service, at the end of
six months' service, $250 life insurance, and they may subscribe to
$250 more; at the end of two more years, $500; and they subscribe to
$500. From then up they can go to the limit of their salary, the
company just carrying half of the expense, and the man carrying
the rest; and this sickness, accident, and total disability the man
carries entirely himself. But if a man takes two kinds of insurance,
if he is a subscriber to two kinds, then if he is dismissed for cause,
we pay him $15 a we,ek for six weeks, wdiile he is hunting a job. He
may get a job sooner. He must make affidavit to his inability to
get a job. Of course that compensation ceases the day he gets a
job; but up to the limit of six weeks we pay him $15 a week.
The CHAIRMAN. YOU do not dismiss any men, then, except for
cause ?
Mr. LOREE. NO, we do not.

If a man resigns, w,e do not pay


in that case, at all.
The CHAIRMAN. I n other words, you do not lay off anybody because of lack of work I
Mr. LOREE. We furlough certain men.
The CHAIRMAN. That is what you mean by dismissal?
Mr. LOREE. NO. When a man takes a furlough, wThen as in the
train service it may be, under the fluctuating of business, a man
asks for a furlough, which is a strictly temporary condition
The CHAIRMAN. That does not disturb his priority?
Mr. LOREE. N O ; because when he comes back he goes on just where
he wras before; except while he is out of the service we carry the
total premium charge on his insurance, and when he comes back he
then makes good, after his return to the service, gradually, the
amount that has been paid for him. That is, he must cash up andl
compensate the company for that portion of the premium on which
he has been protected by the company.
The CHAIRMAN. H O W do you protect those employees who. of necessity, have no work because of insufficient freight?



Mr. LOREE. I t only applies to the train service organization. I t
does not apply to the men in the shops. I t does not apply to the
clerical force or any other—to track labor or anybody else.
The CHAIRMAN. When there is a shortage of transportation to
handle, I understand you rotate the work in accordance with the
priority, or do those that have been in the longest stay on ?
Mr. LOREE. No; in the shops when work gets slack we put everybody on eight hours' work. That is the normal procedure. If we
have to work less than eight hours for five days in the week—or six
days in the week, rather—then we have an option, under the arrangement with the men. We can then start laying people off, or the men
can voluntarily elect to go on shorter hours, which they have done
during this last long period that we have had. For instance, at the
present time they are working six days. The last week in this month
they will work only five days, because of the decrease in business.
As the ton-miles increase and the car-miles increase, that necessitates, of course, a greater amount of repair on locomotives and cars.
Then we go to nine hours at the shop. If it still increases, we go to
ten hours with the same personnel. After ten hours we can hire
more men. That is, if we have to work the eleventh hour, we have
the choice of working the eleventh hour at time and a half, or of hiring more men, which we have never had to do.
(At this point Senator Copeland entered the committee room.)
The CHAIRMAN. I observe from these charts that you only go back
to 1924 and 1926. Was that the period when you started this effort
to stabilize employment?
Mr. LOREE. N O ; we started just prior, in 1922. We were just
getting ourselves in shape to do it before the shop strike. Of course
that temporarily dislocated our situation, as will be seen by the
charts, both as to the large number of men and the very great depression that took place in 1922. I t is not a good picture. But it
was immediately after the road came back from governmental control, and we started making our studies for that material, and we
tried to do something specific in connection with stabilization.
Senator COPELAND. I have forgotten what the attitude of your
road was. I was a commissioner at the time and attempted to bring
about some adjustment between the strikers in southern New York
and the railroads. What was your attitude at that time ? What did
you do with those men ?
Mr. LOREE. Those men voluntarily left our service, and we employed new ones. About 25 per cent came back in the service either
immediately or within 60 clays; or in some cases, where we made
Senator COPELAND. That is, they came in outside of the union?
Mr. LOREE. They came in as individuals and as new workmen.
Senator COPELAND. YOU never did recognize the union in that connection ?
Mr. LOREE. We never have.
Senator COPELAND. Did some of the railroads ?
Mr. LOREE. Oh, yes; some of the railroads have. The New York
Central did, and a number of the other railroads did.
Senator COPELAND. But your road and the Pennsylvania
Mr. LOREE. We never did.



Senator COPELAND. YOU did not take them as union men?
Mr. LOREE. We did not put up any bar, that is on account of a
man going on strike, at all; as we term it, voluntarily leaving the
service. That did not act of itself as a bar to his coming back to
work for the Delaware & Hudson. But that is an individual case.
Of course, we would not put a man out of service who had come to us
in 1922, to make way for a man who might want to come back. We
did not do that.
Senator COPELAND. Am I interfering at all with the progress of the
hearing, Mr. Chairman ?
The CHAIRMAN. We were trying to develop about the stabilizing
of employment without regard to union or nonunion employees, and
Mr. Loree has just made a very interesting statement of the progress
that they have made in an effort to stabilize employment.
What I would like to get, before you leave this subject, is in a
general way, could you say, perhaps in percentages, what improvement has occurred as a result of this effort to stabilize employment?
Mr. LOREE. YOU mean
The CHAIRMAN. I mean in the aspect of the whole number of employees.
Mr. LOREE. I do not know that I can shortly enough answer the
question; but first of all, we have a force that we have at all times,
a force of which the individuals are well acquainted with each other—
that is the great majority of them.
Certainly we must assume, I think, that the longer a man works in
a job, if you keep him at all, the better he should do his work on the
job. There is less waste and more efficient work.
Under the piecework rate scheme, the step rate that we have, for
skill and length of service, the company benefits materially by the
continuity. The man benefits because whenever there is an increase
in business he participates in it, by more work to do.
He shares also in any diminution in the traffic, by working fewer
hours. He is able to, with some degree of certainty, locate himself
permanently in the community. He knows he is not going to lose his
job just because business happens to temporarily fall off. He knows
that a minor official will not, without at least some consideration,
dismiss him, because that becomes a matter of knowledge to the heads
of the departments and to the general manager, because the general
manager has to personally approve the payment of the out-of-work
insurance, with the dismissal insurance, and naturally he wants to
know something about the facts on which he is going to authorize
payment of $90 to a man who has been dismissed from the service;
and of course the company has invested in that man a certain amount
of money, perhaps intangible, for his training, and the wastage, and
so on, that goes with the breaking in of another new man.
The CHAIRMAN. YOU spoke of piecework. Are your men on piecework in the shops ?



The CHAIRMAN. YOU do not pa}' them an hourly wage?
Mr. LOREE. N O . Well, I will say they are about 90 per cent, in
the shop work, on piecework. The remainder is on an hourly basis
because piecework we do not feel is applicable. Piecework will not
go everywhere.




The CHAIRMAN. I S that the general practice of railroad shops, to
be on piecework?
Mr. LOREE. 1 think it is the general practice of a number of
roads. I t is not so with all the roads, I know.
The CHAIRMAN. Based on piecework, where you show the minimum of 32 hours a week and a maximum of 54 hours a week, could
you say in dollars and cents, in a general way, what that amount
would mean?
M. LOREE. Yes, I could. For instance, our car men on a 6-day
week earn $2,100 a year, roughly.
The CHAIRMAN. H O W many hours a day is thai ?
Mr. LOREE. That is eight hours a day. I call it an 8-hour day.
On a 5-day week—that is, an 8-hour 5-day week—our car men
average $151.14 per month. That is at an hourly rate of 92.7 cents.
Senator COPELAND. H O W much a month?
Mr. LOREE. $151.

Those are men on full time? Those are not
on piecework?
Mr. LOREE. Oh, yes; those are on piecework.
The CHAIRMAN. Working five clays a week.
Mr. LOREE. When they work on six days a week, they average
Senator COPELAND. H O W much do they actually average in
numbers of days of employment? Are they employed every week,
those men?
Mr. LOREE. Oh, yes. We have not laid a man off
Senator COPELAND. But what is the average number of days of
employment of those men who are on piecework? What is the
average number of days per week?
Mr. LOREE. That fluctuates between 8 and 10 hours, depending on
the amount of business. The hours per day, that is what your question calls for?
Senator COPELAND. Yes.
Mr. LOREE. Eight to ten hours. When business is slack they work
8 hours, and when business is very good they work 10 hours.
Senator COPELAND. But what I want to get is, what is the average
number of days per week that they actually do work ?
Mr. LOREE. Five and a half days is the average.
Senator COPELAND. Throughout the year?
Mr. LOREE. Throughout the year. I have a chart here that I
think will perhaps illustrate that. Here are the hours [indicating
on chart]. This is the depression of 1921. This [indicating] is
when we were under the old practice, where we shut the shop righr
down. This is the strike [indicating on chart]. This line is the
40-hour line. These are the hours that were worked above 40, and
you see this was below [indicating]. The men voluntarily decided
to work short hours in order not to diminish the force, and we
have been working two weeks a month on full time and two weeks a
month on a short period of time.
(See chart No. 5.)
Senator COPELAND. Does this chart mean that no man worked less
than 30 hours?
Mr. LOREE. Yes, that no man worked less than 32 hours.



Senator COPELAND. NO man worked less than 32 hours, and some
Mr. LOREE. No; this is the end of the period [indicating on chart].
Senator COPELAND. Yes, I see. In taking on new men how do you
determine whether you will take a man or not? What qualifications
must he possess?
Mr. LOREE. That is dependent on the qualifications required for
the individual department, and the job which he is applying for. In
general, of course, he must take a health examination.
Senator COPELAND. He is required to do that?
Mr. LOREE. He is required to do that.
Senator COPELAND. If he had a hernia or some other disability he
would not be employed?
Mr. LOREE. N O ; we allow a man to waive that. There is, of
course, some question whether we should do that; but we allow
a man to make a certificate with a doctor's statement that he had
Senator COPELAND. That is, he agrees that if he should suffer any
disability due to that hernia, the company would not be held for
that ?
Mr. LOREE. Yes, because he admits that, and the doctor's certificate
shows that he is suffering from hernia.
Senator COPELAND. But he would not be barred
Mr. LOREE. Only in some respects. Of course we would not put
a hammersmith on who was suffering from hernia.
Senator COPELAND. I am particularly anxious to know why you
would decline to give employment to a man.
Mr. LOREE. We decline to give employment to a man when he is,
Senator COPELAND. That is the very point that I have in mind.
What age?
Mr. LOREE. Forty years of age.
Senator COPELAND. Thai is, you would not take a man beyond 40?
Mr. LOREE. Not normally.

Senator COPELAND. What are we going to do with the men who
are past 40? What is the country or what is society going to do
with men who are past 40?
Mr. LOREE. I can tell you what we do with them; we keep them
in the service.
Senator COPELAND. That is, you keep a man in the service when he
reaches 40 or 50; but suppose a man comes to you who is 40 or 50.
Suppose I come to you and say, " Mr. Loree, I want to work for your
railroad." You say, " H o w old are you?" I say, " I am 50." " I
cannot take you."
Mr. LOREE. NO ; Ave would say, " Why have you not got a job now ? "
That is the answer.
Senator COPELAND. One of the things before this committee is, as I
understand, what are we going to do with these poor fellows who
are not working and can not get work? What is your idea about it,
Mr. Loree?
Mr. LOREE. Ten per cent of the men, according to our own experience—about 10 per cent of the men—are of such a low mental efficiency level that they can not undertake steady employment. That
is, they will not remain on the job either efficiently for the company



or for themselves. They have the " wanderlust," perhaps is about the
only way you can describe it. A man does not want to work.
Senator COPELAND. Grant that there are some such men.
Mr. LOREE. Those men will only remain at work for a few days if
you give them a job, and then they will float away; and in a week or
10 days those same men will be back wanting a couple of days' job
again. Now, we have not been able to determine very definitely,
because the past history of these people is, from our point of view,
almost impossible to ascertain, as to whether that is a mental situation which has existed from birth.
Senator COPELAND. They are tramps ?
Mr. LOREE. Well, almost—or whether it is a developed mental attitude in the majority of cases; because, as I say, these men wander
in and they wander out, and you can not trace their past history very
well—or, at least, we can not.
Senator COPELAKD. All right. Now, what about the other 90 per
Mr. LOREE. The other 90 per cent, or a number of them, of course,
are steadily employed. You have a certain number of men who come
to you who are over 40 years of age that want jobs. I would say
that those men have not got jobs, or a great many of them, certainly,
in the railroad business, because of infraction of the rules, or personal conduct, because of which their former employers dismissed
Senator COPELAND. D O they represent the other 90 per cent ?
Mr. LoREfl. No; 10 per cent of your total are these wanderers.
Senator COPELAND. Yes.
Mr. LORE$. The 90 per cent remaining are divided between the
people who are steady men and the people
Senator COPELAND. YOU misunderstand me. I am talking now
about the man past 40 years of age wTho applies to you for a job.
Your reply to me was that 10 per cent of the men who apply to you
for jobs are of the tramp type.
Mr. LOREE. I did not make myself clear. Ten per cent of the
workers are of that type; so that you get only a proportion applying
to you for a job that are of that 10 per cent. There are some men
who are not of that type at all, but because of infraction of the rule,
either the written rule, or their conduct, have been dismissed from
former employment.
Senator COPELAND. That is all right; but now what about the man
who applies and appears to be all right, to be a good citizen, but he
is 50 years old? W h a t are you going to say to him? No matter
whether he stands a health examination or not, you are going to decline him, are you not?
Mr. LOREE. NO. I n general, I would say we do.
Senator COPELAND. Then what is this committee going to recommend to the Congress to be done with the man past 50, who is
healthy, who is able-bodied, but who can not get employment because industry will not take him?
Mr. LOREE. I think that the question is not, can he not get employment, but the question is why has he not got employment?
W h y did he leave the employment in which he was ?
The CHAIRMAN. I n other words, why is he seeking employment
at 50 years of age, instead of having settled himself?



Mr. LOREE. Taking the specific case of an engineer, here is a man
who runs a locomotive. There is hardly a man in the United
States running a locomotive who has not had five years' training.
That is almost axiomatic; certainly to-day. You have got an investment in that man of at least $5,000, although you may not be
able to point out just where you have spent $5,000 on him. You donot let that man go without some thought; and yet he is a man
who normally is up around 40 or 50 years of age.
When he leaves your service, what are the causes of his separation from the service, normally? He has bad habits; he has disobeyed some of the rules, not once but a number of times. That
man has trouble finding a job. Certainly he is almost barred from
ever finding a job again as an engineer. You will take him on
perhaps as a hostler. You might take him on as a wiper or at some
job of that kind. Now, of course that is only after repeated offenses. You do not do that in a minute. No road can afford to
do otherwise. If they should, they would be losing money. But
that man comes to you with a bad reputation. He has to seek
common laborer's work, practically, in the end.
Senator COPELAND. Let me put the thought before you in a more
specific way, because it is a matter of great interest to me, and I
know this from my conversation with men throughout the country
generally. Take, for instance, the bituminous coal-mining industry; there are 250,000 more in that industry than are needed;
three or four thousand mines more than we need. If I had my
way, I would do away with the law preventing it, and would
permit consolidation; but that is neither here nor there. We have
250,000 more employees there than we need. Some of those employees are undoubtedly abJ#-bodied men who have been diligent
ancl capable, but who are 50 years of age or over. Suppose one of
those men applied to you, with a perfect record back of him, of
decency and of employment; out of work because of the conditions in that industry. What would you say to him ?
Mr. LOREE. We would have to say, " W e have not got a job for
you to-day." But look on the other side of the situation, Senator.
I n six years the Delaware & Hudson Co. have had just 50 men put
out of their service because we did not have any jobs for them.
We have only turned loose, into the army of the unemployed, 50
men in six years.
Senator COPELAND. When you did turn them loose and you had to
select out six men, you took six men who were past 50.
Mr. LOREE. NO ; there were 50 men in the six years.
Senator COPELAND. All right.
Mr. LOREE. Those were young men. We do not turn loose old
men, unfortunately—or fortunately, depending on whether your
stockholders think you ought to give more to them, or whether
they think it is all right. But those 50 men wTere young men who
had lost standing in the company's forces, in most cases.
Senator COPELAND. I was in Massachusetts during the campaign,
to speak for my friend Senator Walsh, and I was in Lowell, Mass.,
and after my speech a man came up to me to thank me for what
I had done to help the Spanish War veterans get a pension, and we
passed that off; and then he said to me, " You are a doctor. How
do I look? " I said, " You look 100 per cent." He said, " I have



been walking the streets in Massachusetts for six months, and I can
not get a job because I am 50 years old." Now, granting that he
was telling the truth about his habits, and that his situation was
due to the depression in the textile industry in Massachusetts, what
is going to become of that man? Suppose he comes to your railroad ; you would say to him, " We can not take you. You are over
50 years old," would you not ?
Mr. LOREE. If we were hunting for men, yes. If he had come to
us in the last six years, we would have said, " We can not take you,
because there is no place to put you in."
Senator COPELAND. What is your idea of what should be done
with such men?
Mr. LOREE. My idea is that men who are employable by a stabilization of the industry should be continued in employment, and then
you would not have the problem of the men you are talking about.
Senator COPELAND. That is, in the future we would not have
them, because you would take care of them now?
Mr. LOREE. Yes; that is what w^e try to do. Now we have, as I
say, only had 50 men discharged in six years, since our scheme
Doctor L U B I N . Out of a total of how many?
Mr. LOREE. We started with about 15,000. We have had only
50 men in six years who have been turned loose because we did not
have something for them or did not make something for them to do.
Senator COPELAXD. And they were all comparatively young?
Mr. LOREE. I would say they were all young. The junior man
ordinarily goes out first. We have a lot of old men; there is no
question about it. They have been in the service a long while;
families have grown up on the property and worked there. Three
generations is not unusual. We know that those men, after a certain age, become le^s effective, less efficient. That is perfectly
natural; especially in the more arduous work. But, after all, they
have a very good influence on the younger men. They have given
the company long service. As you said, there is a problem behind
it all, what are they going to do if they are out of work; and it is
not with any purely humanitarian idea that we went into this
problem. This is not because of some sentiment; this is because
Ave think it is financially beneficial to us that we should keep them
doing something.
Senator COPELAXD. If there were a general reconstruction of industry, so that your own experience in attempting it would not be
unique, woidd it be possible and feasible to reduce the hours of labor
per week for all your men. so as to bring more into employment?
Mr. LOREE. N O ; because we would not be able to get regularity of
Senator COPELAXD. Could there not be a reorganization of your
entire structure so that it could be done? Now, you see what I
have in mind is to take up the slack, if there is a slack. I suppose
that is hardly doubtful, at any rate, Mr. Chairman. Would you say
that there was slack among the unemployed?
The CHAIRMAN. There is no argument about that.
Senator COPELAXD. Well, all right; then could there be a reorganization in industry so that you could materially reduce the hours



of work per week, have a reorganization, and bring in a larger number into employment?
Mr. LOREE. We do not feel so.
Senator COPELAXD. YOU did reduce the hours. When your company was operating, years ago, there must have been a time Avhen men
worked 17 or 18 hours ?
Mr. LOREE. Oh, yes.
Senator COPELAXD. NOW you say you work
Mr. LOREE. We work between, 8 and 10 hours.
Senator COPELAXD. I t must have been put up

to the management
of your railroad 50 years ago that you could have an 8-hour day.
Mr. LOREE. We do not believe you can have an 8-hour day. We do
not believe that is possible, from our experience.
Senator COPELAXD. And yet your men are working less than that,
or about that?
Mr. LOREE. N O ; they are working a little better than that.
Senator COPELAXD. But they are not working nine hours a day ?
Mr. LOREE. Not as a general thing. They work at certain periods
9 hours a day and at other periods 10 hours.
Senator COPELAXD. Was there not a period when they worked 12
hours a day?
Mr. LOREE. Yes.
Mr. LOREE. Yes.

Then, the section men worked 12 hours?

But there was a reorganization, so that those
section men are now working 8 hours ?
Mr. LOREE. Ten hours for about half of the year, and the other
half of the year about 8 hours. But that is because we have introduced machinery. For instance, take a section motor car;* a man
gets to work much more rapidly than when he had to use a hand car,
and he gets home quicker and he works more hours on the track.
Senator COPELAXD. Your judgment is that he works as many hours
now on the job as he did in the old days?
Mr. LOREE. Probably more; that is, actual work on the track. I
am not talking about time on duty, because he is not on duty so many
hours; but because of the labor-saving machinery and because of the
use of motor cars he spends more time on the section, working on the
track. He puts in more of his time on the track working than he
used to. That is not true, for instance, taking certain sections of the
New York Central Kailroad. Due to the density of the traffic, I do
not believe they put in anything like the amount of actual work on
the track that they used to, because they can not. I think on the
New York Central—this is just my recollection of it—they figured
that they only got something like two actual hours of work a day
out of a section gang. That is because they had to spend so much
time getting off the track and on it again.
Senator COPELAXD. I want, sometime, to bring out the points that
I have in mind now, but I do not want to interfere with your program. Go ahead.
The CHAIRMAX. Have you anything that you could suggest, that
you have not already suggested ?
Mr. LOREE. N O ; I have not, Mr. Chairman. We have tried to
answer here the questions that you have propounded, and we would
be very glad, of course, to reply to any questions that may occur to



your minds, later; either to write to you or state it, if there is anything further or anything you want to amplify.
The CHAIRMAN. When we get all this summarized, we may have
to ask you for something further.
Mr. LOREE. I shall be very glad to answer.
The CHAIRMAN. Please state your name and your position.
Mr. LARKIN. My name is J . M. Larkin. I am chief assistant to
President Grace of the Bethlehem Steel Co.
The CHAIRMAN. I understand you have done considerable work
and given considerable thought as to the stabilization of employment, and we would be glad to have you tell us, in your own way,
what you have done.
Mr. LARKIN. Mr. Chairman, wTe have answered the questions that
you propounded here in a written memorandum. I am prepared to
either read a statement or just follow it as an outline and discuss it
as we go along, whichever you prefer.
The CHAIRMAN. Suppose you read it, and we will follow you as
you read your statement.
Mr. LARKIN. Very well. We are glad to come down here to talk
with you about this very important subject that the committee is investigating, but as Mr. Grace wrote you the other day, we believe
our friends have been a little too complimentary in representing to
you that we have completely solved the far-reaching and very puzzling question of unemployment.
Nevertheless, I shall try to give you a picture of what Ave feel we
have accomplished toward regularizing employment in answering
the questions which Chairman Couzens propounded in his letter of
You first ask how irregular was employment in our plants before
we attempted to stabilize it. I must point out that our efforts to
stabilize our employment can not be traced to any particular beginning, as we have been making a constant effort in this direction over
many years with perhaps the greatest indication of progress since
the war.
Prior to the war there were violent fluctuations in emplo}Tment in
our company, due in part to the severe cyclical changes in business in
those years, in part to the fact that the products of our own company were not then sufficiently diversified to maintain a steady rate
of operation, and in part to the fact that we had not established such
relationships with our employees as are necessary to any permanent
relief of fluctuations of employment. This I think was true of industry generally, so that we were no exception to the general rule
at that time.
Your second question is, By what means did you undertake to
provide steady employment? As I view the matter the question of
steady employment is influenced by two major factors—
First, by those external elements over which a particular company
has no or very little control, these having to do with the demand for
its product which obviously will affect the employment of labor.



Second, by those internal elements over which a company has a
certain amount of control. I n dealing with these internal elements
Bethlehem's efforts have been directed along two general lines,
namely: *
(a) Management policies leading to stabilization of operations.
(b) Labor policies leading to better relations between management
and employees.
Those management policies wThich have contributed toward more
regular work have embraced—
Consolidation of properties.
Modernization of plants to the extent of expenditures aggregating
over $150,000,000 during the last five years.
Diversification that gives the company a complete range of products to meet all steel demands. This diversification has been a
tremendous factor in affording steadier work to employees.
As an example, one plant which formerly manufactured only steel
rails is to-day manufacturing in addition to rails, pipe, wire products, sheet and tin plate, plates, sheet bars for the automobile industry, plates for building construction and other products. Thus this
diversification has largely fortified the employees against the unemployment which arose from dependence upon the manufacture of one
product which was more or less purchased on a seasonal or restricted
basis. Another plant which was formerly devoted almost entirely
to ordnance manufacture is nowT almost entirely devoted to commercial steel products. What has taken place in these two plants is
typical of developments throughout our corporation.
Improvement in operating control resulting in a more suitable
distribution of work among plants to insure most economical and
steady production.
I n the matter of labor policies our President, Mr. Grace, about 10
years ago laid the foundation for our present industrial relations
work. I n embarking upon this program he summarized the reasonable wants of employees to include, first, steady uninterrupted employment and the payment of fair wages for faithful efficient services; second, a voice in the management to the extent at least of
jointly determining conditions under which men are asked to work;
third, good safe physical working conditions and provision against
accident, sickness, and death; and fourth, an opportunity to acquire
financial independence through saving, home ownership, the purchase of a stockholder's interest in the business, relief in case of need
and pensions in old age.
I n carrying out this policy the company adopted a number of
specific plans having a bearing directly upon stabilized employment.
I t first established a department of the corporation under the direction of the assistant to the president to formulate and administer
through the management of its various plants its labor policies.
Briefly, some of the plans comprising our industrial relations policy
A completely organized employment department in each plant
for the hiring, transferring, and terminating of employees on a
humane and business-like basis. Through these employment departments many of the ills which formerly contributed to unemployment
have been corrected. An attempt is made so far as possible to recruit
labor from among local citizens. If employees are unfitted for one



class of work they are transferred to other work. During the last
year some 16,000 employees were thus transferred from one kind of
work to another within our plants. No employee leaves the company without being interviewed by the employment department.
I t has thus been possible in a great many instances to make an adjustment for the employee which has prevented his being added to the
roll of the unemployed.
Our labor policy has recognized that adequate wages are the crux
of the employment relationship. I t has been the constant aim of the
management to increase the earnings of employees while at the same
time it has striven for reduced costs of manufacture. This has been
accomplished by the application of various methods of incentive
wage payment that compensate employees in accordance with their
output. Indeed our whole labor policy has recognized a new responsibility for management in the matter of wage payment. Management has come to believe that the ability to pay high wages is
as much a measure of its efficiency as the ability to obtain low costs.
I n the past much unemployment has resulted from misunderstandings between management and employees. I n some plants and some
industries labor conflicts resulting in strikes and lockouts with consequent interrupted employment have occurred at frequent intervals,
because of absence of an effective means of dealing between management and employees. We have provided against this condition by
the inauguration of an employees' representation plan which permits
of contact and conference between the employees' elected representatives and the management and provides measures for adjusting possible difficulties without interruption to work. I n addition to providing a channel of contact between management and the employees
for the adjustment of misunderstandings which might otherwise entail hardship through interrupted employment the representation
plan has been a powerful factor in increasing efficiency and interest
of the employees because of the opportunity it affords for keeping
them constantly informed on the facts of the business.
Among the work hazards which the employee has to face, perhaps
the greatest is the risk of accidents. Accidents in the past have
caused great suffering and distress and much loss of working time
in industrial life. We have vigorously attacked this problem and
with the cooperation of the employees over the last ten years have
been able to greatly reduce accidents. I n the last year alone a contest which we have conducted in our plants has resulted in reducing
accidents 25 per cent over the }Tear before with a saving to employees
in wages of over $1,000,000, and in addition there has been a substantial saving to the company. Along with these efforts in the prevention of accidents has gone an improvement in sanitary arrangements and working conditions and in the quality of medical service
furnished to the employees.
As a measure of relief for employees whose working time is interrupted through sickness, we have in operation a relief plan to
which the employees contribute and which affords generous sickness
and death benefits. I n addition to its financial aspects the plan,
through its administrators, is making special effort to correct the
causes of sickness as a measure of even greater employment stability.



The one hazard which the employee has to face and which can not
be overcome is that of old age, and to take care of this we have instituted a pension plan which gives an employee financial assistance
when it becomes necessary for him to retire from active duty. At
the present time the corporation is expending under the plan $500,000
per year, and there are perhaps 1,000 pensioned emplo}^ees on the
The CHAIRMAN. Would you mind if I interrupt you there ?

what extent does the employee contribute to*
the pension fund ?
Mr. LARKIN. He does not contribute to the pension fund. I t is
paid for entirely by the company.
Senator WALSH of Massachusetts. I n other words, it charges u p
a certain amount against its earnings for this purpose ?
Mr. LARKIN. I t goes against cost of operation, Senator?
The CHAIRMAN. I S it done on the percentage basis, or how do you
arrive at the amount?
Mr. LARKIN. Briefly, the plan provides that a man will be pensioned after 22 years of service and after reaching 65, on the basis
of 1 per cent of his annual earnings, multiplied by his years of service. I n other words, the longer he has worked for the company, the
more the pension payment will be to him.
The CHAIRMAN. D O you set up any fund to protect that, or how do
you protect it ?
Mr. LARKIN. Yes. A t the time a man is pensioned we set up an
amount that is estimated to be sufficient to carry through that pension
to maturity. I n other words, at the time a man is pensioned we
would set up the equivalent of five years' pension in a fund.
Senator W A L S H of Massachusetts. Not the pension for that one
year, but for his probable lifetime ?
Mr. LARKIN. For his probable lifetime; yes.
The CHAIRMAN. But what I wanted to get at is, does the company
set up any reserve to provide for that out of its earnings?
Mr. LARKIN. Only after the man has been pensioned.
The CHAIRMAN. I n other words, you do not anticipate
Mr. LARKIN. There is no provision in advance for pensioning a
man in any general fund.
The CHAIRMAN. I n other words, if you were confronted with bad
business, and a lack of cash, and you had a lot of those employees,,
you might be embarrassed by not having created a fund; is that
correct ?
Mr. LARKIN. I t would not embarrass us, Senator, so far as the
employees who were on pension were concerned, because their pension
has been provided for in the fund. You see, at the time a man is
pensioned the company sets aside a sum of money that is estimated
to be sufficient to carry that pension through to maturity.
Senator W A L S H of "Massachusetts. Aside from the pension of that
year they set it aside?
Mr. LARKIN. They set it aside at the time he is pensioned and
charged it against current cost.
The CHAIRMAN. Perhaps I have not made myself clear. You do
not anticipate, then, any man who is going to be retired?
Mr. LARKIN. N O ; not through any financial provision.




Mr. LARKIN. A S a result of the financial aid which comes to
employees to-day under workmen's compensation payments and under
the relief and pension plans, it is estimated that employees are having
made up to them over one-half of the loss that they wrould sustain in
the absence of these plans. This is of tremendous economic benefit
to industry and the community at large and furnishes effective insurance against unemployment due to accident, illness, and old age.
Another form of financial aid which can have a material effect upon
stabilizing employment is to give to employees encouragement and
assistance toward home owning. This we have done through a home
ownership aid plan.
Since 1924 the company has operated a stock purchase plan under
which 35,000 employees have acquired on easy and favorable terms
over $13,000,000 worth of the corporation's preferred stock and this
amount is increasing year by year.
Senator W A L S H of Massachusetts. What percentage is that ?
Mr. LARKIN. Of the total preferred stock, approximately 13 per
cent. There is approximately $100,000,000 of that stock. Although
devised primarily as an aid to thrift and investment, the stock plan
can be an important incentive to stability of employment since the
stockholding wage earner is less likely to leave the company than one
whose only financial connection is through the pay envelope. Moreover, the plan is of the greatest benefit to the employee who for any
reason is permanently or temporarily off the pay roll since his shares
of stock provide a financial backlog as protection against emergencies.
This again in effect constitutes a measure of insurance against the
effects of unemployment.
The CHAIRMAN. Just at that point, you say " temporarily off the
pay roll.' 1 Why would he be temporarily off the pay roll, except for
accident or illness?
Mr. LARKIN. Due to the temporary closing down of a department,
The CHAIRMAN. Why would you temporarily shut it down?
Mr. LARKIN. Due to the lack of orders.



Mr. LARKIN. For instance, I can cite one instance of a car-building
department in one of our plants. Because of the lack of orders for
cars for the last year and a half we have had very irregular working
times, and there have been periods—say over a period of several
weeks—when that department has been closed down.
The CHAIRMAN. D O you make any effort to minimize the effect of
that by a division of work among your employees?
Mr. LARKIN. Yes. Our first effort in that instan' e would be to
transfer those employees to other work within the plant, and to the
extent that we would be able to do that we will take up that labor
and hold it in readiness for the resumption of operations of that
department. If we, however, reach a point where that labor must be
absorbed, if it is a ease where the entire department is closed down
and we are not permitted to rotate the employees on part time, the
only other recourse would be to temporarily release them.
The CHAIRMAN. Then there is no benefit for those who are temporarily released ?



The CHAIRMAN. Have you any figures to indicate the fluctuation
due to that ?
Mr. LARKIN. Yes; I have a chart here that I expect to showT you.
So far as it is compared w^ith the number of employees, it is very
minor. I just offer that, to illustrate the incident there.
Referring again to the value of the stock plan, this again in effect
constitutes a measure of insurance against the effects of unemployment.
All of these industrial-relation policies, in addition to their own
advantages, have a direct bearing upon regularization of employment since they reduce causes of friction, improve efficiency and
morale, further confidence and cooperation between employees and
management, and emphasize quality and quantity of production
essential to the retention of markets.
Your third question is, What problems did you encounter in bringing about regular employment ?
I have already referred to the external economic conditions in
business over which a particular company has no control. Assuming
that we have secured the maximum effectiveness in the management
policies and labor policies which I have discussed, we can offer
steady employment so long as the railroads, the automobile industry,
the building-trade industry, and the oil industry (these consuming
the greatest tonnage in steel) and other industries continue to place
orders for steel. They will, of course, place orders so long as they
can in turn sell their products and services, and so it goes around an
endless c}7cle all of which is based upon general prosperity throughout the country, which in turn will be supported by high wages,
plentiful money supply, and profits for investors.
During recent years, in 1924 specifically, there was a period of
business recession which adversely affected the operations of our
company, although the effect was less severe than it had been in previous periods of slack business and than it would have been except
for the measures for stabilizing employment which have been discussed. One factor which made this period less severe was due to the
new condition in business which we have seen in industry in the last
few years—namely, hand-to-mouth buying, under which the period
of recession was undoubtedly shortened because of the absence of
large stocks of commodities on hand. I t is noteworthy that during
the period of business recession referred to the wage scales of the
workers in our company were not impaired as contrasted with the
old days when the first thought of management in a business recession was to cut wages. During this period the effects of the depression from an employment standpoint were greatly modified by the
policy which the company adopted of spreading out tlie work among
the maximum number of employees.
I repeat that in the efforts of our company to regularize employment the most serious problems which Ave have encountered are
those incident to outside economic conditions which we could not
control and the effects of which we could only modify. However,
there were some internal conditions distinct from the general business situation which offered additional problems. These were—
First, a constant necessity to hold manufacturing costs to a minimum. This necessity was accentuated by the extraordinarily keen
competition in ours and in other industries. Under the older sys



tern of management the urge to cut costs might have been the incentive to wage reductions and to instability of working forces.
I n avoiding these evils management was required to handle the
problem with greater foresight and skill and devise new and improved methods of doing work; second, there has been the necessity
of balancing our desire for stable employment against the need for
establishing working forces at the minimum from the standpoint of
efficienc}^. I n the course of recent industrial changes it has been impossible to wholly avoid laying off some employees who have become
superfluous. This n a t u r a l has added to the difficulty of regularizing employment. But wherever it has been done its effects have
been offset because of the full-time employment it has afforded those
retained and whose sustained purchasing power has indirectly served
to afford relief by creating a demand for products whose manufacture absorbed this surplus labor; third, there have also been the
problems growing out of the occasional situations in which economy
could be effected by transferring work from one plant to another
and segregating certain types of work at one plant as opposed to the
diversification of products to which I have referred. Oftentimes,
because of changing markets and other conditions, it is found that
an established product of a certain plant can be more economically
produced at another plant. I n carrying out this necessary manufacturing economy grave problems as affecting employment will
arise. While they are not altogether insurmountable, they do nevertheless require special study and treatment.
You now ask, How successful have you been in your efforts ?
We feel that the results which we have obtained in regularizing
employment are partially reflected in the following facts as to labor
turnover, labor stability, and fluctuations in the pay roll.
Labor turnover (rate of terminations) has been reduced from 135
per cent in 1923 to 43 per cent in 1928 as shown in the following



Per cent

The CHAIRMAN. Where was that jump from about 60 up to 85, and
what caused it ?
Mr. LARKIN. That was in the year 1926, when there was an increased rate of operation which necessiiated taking on additional
The stability of the working force as shown from year to year in
Ihe following table is an indication of progress toward the regularization of emplo}^ment.
The working force by years was as follows:

Average number
of employees

The CHAIRMAN. What became of those 4,000 men between those two
periods you have just mentioned %



Mr. LARKIN. They have drifted out into other employment.
The CHAIRMAN. That is, a part of the unemployed group.
Mr. LARKIN. And that is right in line, and I would like also to
say there that it reflects a reduction in our labor turn-over; and as
you reduce your labor turn-over, naturally the increase in your force
employed will showT a greater stability, so that that is reflected in
The CHAIRMAN. Yes; but there was a big change between certain
years that you just mentioned there. I did not get the impression
that that was due to the stabilization or regularity of employment,
Mr. LARKIN. The big change there is between 1925 and 1926.



Mr. LARKIN. I n 1925 there were 62.000 employees on the pay roll
and in 1926 there were 67,000.
The CHAIRMAN. But I mean the drop below that. There was a
drop, then.
Mr. LARKIN. I n 1927 it dropped back to 63,000.
The CHAIRMAN. Why was that?
Mr. LARKIN. 1926 was the year of the resumption of the steel
business, getting back to a high rate of operation, which necessitated
taking on new employees. By the time we had gotten into 1927
and our rate of operation was steadied up. our forces became more
stable, and those flurries you take on in the hiring of your employees
were eliminated from the roll.
The CHAIRMAN. SO that those 4,000 that were laid off in those
years became a part of the general unemployment problem?
Mr. LARKIN. Yes; they were a part of it before they came on our
roll, and they went back to it.
Doctor L U B I N . You are working steadily now?
Mr. LARKIN. We are working steadily now, and the rate of operation we have this year will be in excess of that of 1926, which was
also a good year from the standpoint of operation.
The CHAIRMAN. YOU have not had to take on any more men?
Mr. LARKIN. We have not had to take on any more men; because
that is one of the advantages of steady operation and regularizing of
your employment, that you can operate with a steady force of employees; whereas, if you go down in your rate of operation this
year and then go up next year, there is a period there over which
you are taking on new employees and trying them out and fitting
them into the operation, which will mean that for a period you will
show a higher average force. If you can get your operation steady.
3^ou can operate with a lesser force.
The CHAIRMAN. Even with more product?
Mr. LARKIN. Even with more product; yes.
I might point out in that connection one figure which I think has
a bearing on this from a strictly cost or financial standpoint. That
is that from 1923 to 1927, without any disturbance of the wages of
the men, the cost of manufacture of finished steel products has been
reduced approximately $7-25 a ton. That is another advantage of
coordination and stabilization of your operation and employment.
Fluctuations of force within each year between 1921 and 1928 are
shown on the attached chart. Whereas the high and low points of
employment in 1921 fluctuated 50 per cent from the average, during



the following seven years these fluctuations were steadily reduced
until in 1928 the high and low points of employment varied hardly
10 per cent from the average for the year. This is on the basis of
the fluctuation in the pay roll. This line [indicating on chart] is
the base line which shows the average pay roll. I might explain that
in this way, that our pay roll is approximately $120,000,000 a year.
That would mean that the average monthly pay roll would be
Taking this line on the chart to be the average of $10,000,000,
then as the pay roll per month fluctuates above and below the
$10,000,000 it shows the extent to which steady work has been given
to the men, as reflected in their pay envelope; which, after all, is
the thing that they are concerned with.
I t shows here that back in 1921 the fluctuations were as great as
50 per cent above and about 38 per cent below. That has been
steadily ironed out, through management and labor policies, until we
come down here to-day to show that the fluctuations throughout the
course of the year are minor—not over 10 per cent. This [indicating]
happens to be an increase, and the decrease in no case was as great
as 10 per cent.
The CHAIRMAN. Was that helped by the condition of the industry
or by budgeting or what not ?
Mr. LARKIN. That was helped by all of the factors that I have
mentioned. For instance, the program of consolidation which this
corporation went into back in these years here [indicating on chart],
followed by a program of modernization and diversifying the products of the operation, and then resulting in better operating control
of all the properties, and, of course, a better position of the company
commercial wise to go out and obtain the necessary business with
which to operate on a steady basis.
The CHAIRMAN. SO that in addition to being a very humane result it has proven to be a good business plan ?
Mr. LARKIN. I would say that the two go hand in hand; that
wdiat is a good thing for business is a good thing for the employees,
and vice versa; and I certainly feel that in this instance that is
borne out.
The CHAIRMAN. YOU pointed out the fact that there had been
considerable reduction in cost of manufacture; I think, $7 a ton
reduction in the cost of producing steel.
Mr. LARKIN. The actual figures, Senator, are $7.27.
Senator W A L S H of Massachusetts. Has the public benefited by that
reduced cost also ?
Mr. LARKIN. I n that time the prices of steel products have decreased, slightly more than the reduction in cost.
Senator W A L S H of Massachusetts. So that it has been of benefit
to the public also ?
Mr. LARKIN. T O the public also.
Senator W A L S H of Massachusetts. As well as to the company?
Mr. LARKIN. I have not the actual figures on the reduction to the
Your last question asks, to what extent measures similar to those
adopted in our company can be applied to other plants and other







Naturally, I am intimately acquainted with conditions only in the
Bethlehem Steel Co. I n a general way I know that other employers
are interested in the subject of unemployment and are making efforts
at stabilization. Their interest to a certain extent reflects humanitarian motives and the desire to benefit their employees. To a greater
extent, however, it is due to a recognition that stabilization of employment and satisfactory operating conditions from the standpoint
of management, stockholders, and business in general is highly desirable. Stabilization of employment is good business; on the other
hand, it is by the adoption of good business methods that this stabilization can most effectively be secured. After all, industry itself
has come to be dependent upon the uninterrupted purchasing power
of the masses of the people, and for this reason, if for no other, it
should do all it can to maintain the earning power of the wage
earner through steady work in order that it in turn will have a
steady market for its products.
As to the extent to which other employers might make use of
methods similar to our own I am not qualified to speak with authority*
since I am not familiar with problems in other companies. I should
think, however, that the same general principles modified to suit the
conditions of each company might be followed with results approximately comparable to those which we have secured.
The CHAIKMAN. YOU spoke in the former part of your statement
about organizing your employment services on a very businesslike
and humanitarian basis. Have you any rules with respect to age—
in regard to the employment of men of certain ages?
Mr. LARKIN. We have, Senator, in this respect, that we aim to employ new men—that is, men who have never had any other connection
with the company, men who are not taken on on the basis of being
rehired—under certain rules. The rules in those cases are that the
men shall be subjected to a physical examination, that they shall be
able to qualify from the standpoint of physical and mental and work
ability, and that they shall not be over the age of 45, excepting in
special cases where that rule may be waived by the management.
But the reason for that is that we are coming to a point in industry
where we are getting down to a stable basis where our effort is to
regularize work and to stress doing something for the older employees, because that goes hand in hand with correcting this unemployment problem. I t means that we are building up older employees from the standpoint of age and service in our plant.
Now, in order to protect them and not to bring into competition
for the limited number of jobs that you have that older workers can
do, workers from the outside that have had no previous connection
with the company, then we must have some limit at which we will
avoid bringing into competition with our permanent employees people from the outside.
Senator W A L S H of Massachusetts. I n other words, your old-age
problem, the problem of men having work after 45 or 50 years of
age, will solve itself if every employer takes care of their men?
Mr. LARKIN. Precisely. If, for instance, we can bring about consciousness in the country on the part of employers of labor, bring
about a sense of responsibility to their older employees, it seems to
me that is the best and soundest method of correcting the situation
and solving the problem of what shall be done for the older employees.



Senator WALSH of Massachusetts. You can adjust the older employees by taking on younger men to take the places of older employees, and who will be with you for a longer period of years ?
Mr. LARKIN. Yes. From every standpoint, you have to view the
taking on of a new employee as you would any other business investment. You have got to consider that if you are goin§ to do the
best that you can for the company, you have got to consider, when
you are taking on a man, having him for a period of years rather
than taking him on for a few months and then throwing him out
on the country.
The CHAIRMAN. I n other words, unless such a policy as you have
described is adopted, the older men will be thrown out, but when the
industries become more uniform in their operation and policies the
older men will not be out ?


I attach hereto a c h a r t which will show the number of occupied positions
in shop crafts and maintenance of way department on this railroad since
J a n u a r y 1, 1923.
We undertook our stabilization program in the l a t t e r p a r t of 1925, and you
will observe t h a t it h a s held a r a t h e r consistent line with one exception to the
present time. I n our maintenance of way department you will observe t h a t
while there a r e wide fluctuations in each year, there h a s been reasonable
stabilization for corresponding months of each year since 1925.
In this territory it is impossible, of course, to m a i n t a i n an even force on
maintenance of way work throughout the year, as the season for us is r a t h e r
short, a n d we a r e obliged to do substantially all work other t h a n ordinary
maintenance from April to November, inclusive. I -therefore see no way of
maintaining even forces throughout the whole j^ear for the maintenance of way
department, since the m a t t e r is controlled in our territory by climatic conditions.
We can, however, to a very large extent m a i n t a i n an even force throughout
the year in the maintenance of equipment. We have made, as you will observe
from the chart, some progress since 1925. Beginning with J a n u a r y 1, 1929,
we have adopted a yearly instead of a monthly budget and will maintain substantially the same number of men each month throughout the year regardless
of the volume of business. This means t h a t our comparative showing as to
net earnings for corresponding months of previous years may be somewhat
varied but it ought not affect t h e total for the entire year.
We have not encountered any serious problems in undertaking to bring about
this stabilization of employment on the railroad. We have h a d t h e cooperation of our men and the brotherhood organizations. To adopt such a program,
however, it is necessary t h a t we make a very thorough survey a t the beginning
of the year in which we undertake to estimate our total volume of business for
the succeeding year. I t also means t h a t we will have more men employed in
the wintertime t h a n we would need to maintain our equipment in good condition and fewer men t h a n we will need in the summer and fall of the year to
t a k e care of the increased volume of work t h a t would be necesary if we were
planning only from month to month. However, we expect to put our freight
equipment in such excellent condition during the slack period of the year, t h a t
the surplus will carry us through the peak period without putting on additional
men who would later have to b'3 discharged in the wintertime. To increase the
pay roll during the slack period of the year means t h a t we are taking some
chance on recuperating by virtue of an increase in the volume of business commensurate with our own predictions later on in the year, and if our predictions
as to the volume of business we will do for the entire year is overestimated,
then it will mean a higher maintenance charge to equipment than would otherwise be necessary.
*I think one reason why this plan h a s not been adopted before is because railway managements have h a r d l y dared to take a chance in relying on prophesy













as to what the total volume of business for the calendar year might be, for if
wre should guess wrong, we would then be in the position of having incurred a
very heavy maintenance charge in the first half of the year that might not be
justified if there should be an unexpected decline in business in the latter half
of the year. If, therefore, the railroads could put their finances in such condition that they could always maintain a surplus for maintenance, it would
aid materially in carrying out such a program, for while we might make a
mistake in predicting our volume of business in a single year, yet it is reasonably certain that the law of averages would apply over a number of years, say,
for instance, five, and that over such a period the charges to miantenance of
equipment on the plan I have attempted to describe would prove to be
reasonably conservative.
We expect, however, to take the chance in the current year, believing that
our predictions are reasonably accurate, and if we are successful, we will have
given employment to substantially the same number of men each month throughout the entire calendar year.
(The appended chart showing the fluctuation of employment in the shop and
maintenance of way divisions of the Chicago & North Western Railway wras
submitted to the committee by Mr. Sargent.)

Being unable to leave Dayton just now, I am giving below some facts and
comment on employment equalization as far as our experience with the subject
goes. I feel this letter will give you the desired information as well as my
presence before your committee.
I shall not attempt to answer your five questions specifically, in view of the
fact that, as far back as my knowledge of the company's labor policies goes,
it is difficult for me to put my finger upon any particular turning point or a
change from highly fluctuating employment to a steadier basis. For many
years we have been recognized as one of the larger companies that consistently
gives steady work to its employees. We can not claim to have undertaken any
definite program of stabilization in recent years wrhich had not formerly been
in use as far as practicable. We have been able to improve or augment some
of the methods theretofore used to level up production schedules.
I am sending with this letter a copy of our enrollment fluctuation chart for
the last six years. Aside from two short dips in 1924 and 1927, the extreme
variation in the number of employees has been about 8 per cent. The two
temporary breaks were due largely to evening up of stock on model changes.
This fall we added about 800 people to our force, due to an increased demand
for some of our late model registers and accounting machines, which we hope
and believe will be maintained.
Our sales, fortunately, are not subject to as sharp seasonable variations as
are those of many companies. The low month usually is February, wThen sales
run between $2,500,000 and $3,000,000. January, July, and August are the
months running near the bottom. We close the factory departments for two
weeks' annual vacation in July or August, and for three clays at New York for
inventory. This automatically curtails production to some extent during the
periods of the year when sales are lowest. Peak sales usually come in October,
with May a close second. October sales run between $5,250,000 and $6,000,000.
Looking only at the low and high months of the year, the fluctuation seems
rather sharp, but the intervening months show a gradual increase or decrease
toward the high and low points, making a fairly easy curve from which to
I do not believe any general plan or policy of employment stabilization can be
applied successfully to all lines of business or industry. Methods must be
determined largely by the percentage and frequency of sales variation, perishability, weight, and bulk of product (which might be the determining factors in
a warehousing program), and other things of a purely local nature.
I might mention that the Frigidaire division of General Motors Corporation
is located in Dayton, and we cooperate with each other in the matter of labor
supply on a very friendly basis. Their peak comes in the spring and early
summer. During the temporary break in our employment curve last year



Frigid aire needed men. They gave preference to and absorbed practically all
the desirable men we laid off. By the time cur stock situation had been adjusted to model changes, Frigidaire's production schedules were being reduced
and we took buck many of our employees whom they had put on during their
peak. The point of this is that employment stabilization is not a problem to
be solved only by individual companies inside their own organizations. It can
be worked out as a community program by companies manufacturing lines with
component production peaks, giving preference to each other's surplus employees as seasonal variations make it necessary.
I have had a number of letters and questionnaires about our exper.ment with
employment stabilization, including one from the Institute of Economics to which
you refer, but have never done anything more than explain the methods we
have been using for a number of years. We do not claim to have anything particularly new, nor any universal panacea for the ills of unemployment.
The sharpest fluctuations in man-power requirements naturally occur in our
assembling division. Daily production quotas for the various types of registers
are revised the first of each month based upon current sales. As a rule whan
the sale of one particular type of machine is down another is up enough to
compensate, and we use the flying-squadron system to meet these changing
requirements in the assembling division. Certain groups of men have been
trained to work on several different types of machines and they are transferred
from one assembling department to another as the sales variations make it
As for our machining and other production departments, schedules are controlled by our stock-ordering department, which corresponds to a planning or
scheduling department in many plants. Approximately 45,000 d fferent register
parts are manufactured and stocked. An average of seven operations are put
on each part, some running as high as 30 operations. Average time of production orders in process is six weeks, with a maximum on some parts of three
months. With few exceptions order for three months' supply are placed in tiie
factory when there is a two months' supply in the bins. Should very sharp
and unusual fluctuations occur in sales, the stock-ordering department extends
or shortens the due dates of all orders in the shop according to requirements.
This enables us to level off the peaks and valleys in the production of parts.
The fact that we have a three months' schedule to work upon makes it possible
to so adjust the work of the production departments that even sharp changes in
the assembly quotas do not affect them very much, if at all.
Warehousing also helps us in the matter of steady employment. Approximately 65 per cent of all registers sold are standard models, many of which
are built in advance of sales, during our low months, and warehoused in
Dayton, New York City, St. Louis, and San Francisco to meet the peak demands
for these types during the spring and fall. This helps to keep the production
schedules somewhere near normal during periods of low sales, and enables us
to concentrate more upon special construction when sales are at a peak. In
1927 our peak of registers in warehouses was 17,053, and the low mark 6,724.
This year the peak was 14,652, and the low 8,026. I do not wish to leave the
impression that 65 per cent standard sales makes an easy problem for us.
The majority of these 65 per cent are smaller models, wThich are produced inlarge quantities. The 35 per cent which are not standard are nearly all the
larger and more complicated models. For instance, although our class 2,000
models comprise only 15 per cent of the total number of registers built, they
require 45 per cent of our total man-hours to manufacture. Ninety-five per
cent of them are specially constructed, and the number of parts run as high as
12,000 per machine.
To sum up, I believe a great deal of effective work can be done to reduce
employment fluctuation by the following methods, along with many which
others understand better than I :
1. More intensive sales effort and perhaps extra inducements for salesman
and buyer during normally slack sales period.
2. Component line manufacturing.
3. Closer cooperation and understanding between JLocal employment and personnel managers.
4. More intensive study of warehousing possibilities.
5. Educating the public against seasonal buying in many lines, such as the
Hill Bros. Co. did in their compaign with the Dromedary line. (The appended
chart mentioned by Mr. Burns in his testimony shows the fluctuations in enrollment in the National Cash Register Co. from 1923 to 1928.)

•}U3Ul[ ( 0 J L U 3


M 0 ! 1 ^ T l l 0T1JJ

Cm -a Sana) "6s—S6I6S



Until a few years ago, our operations and employment were almost constantly
continuous throughout the year. That was possible because our production
consisted in the main of shoes of staple character. There was very little
change in styles and patterns from season to season or from year to year, and
while there were dull seasons for selling and heavy seasons for selling, the
fact that our product was staple enabled us to estimate our requirements for
the year and employ the dull seasons as well as the heavy seasons in manufacturing and storing the shoes that would be required.
While those conditions existed we were able to induce our customers to
anticipate their needs, and through special datings we were able to secure
their orders in advance of their actual requirements.
However, there has been a radical change in these conditions in the last few
years. Our industry now is subject to the same rapid changes of styles that
have affected other industries. Our factories which formerly concentrated
season after season on staple shoes, must now accommodate their operations
to making smaller quantities of shoes that are dictated by style and fashion
from time to time. Our retail merchants, because of these changes in style,
can not and will not anticipate their needs. We no longer have any assurance
as to future requirements.
The fundamental cause for this change in conditions is, of course, beyond
our control. We are meeting the changed situation by exercising more versatility in our manufacturing operations, which are constantly being adjusted
and adapted to meet the changing demands. Every effort is made to distribute
the production to the various factories in such manner as to assure as near as
possible continuous employment in all. This distribution of production is supervised by the head of our manufacturing department, who is constantly aware
of the capacity, equipment, and possibilities of each and every factory, and who
directs the placing of shoes for manufacture after consideration of the fitness
of the factories for producing the particular shoes, and the extent to which the
facilities of the several factories are already employed or are booked for
employment. In considering the facilities of the factories, as a matter of
course, the extent of employment of our workmen is an important foctor.
Over the period of the last 12 months there has been a decrease of about 10
per cent in the average number of employees for the year. During the same
period, owing to temporary shutdowns, etc., our employees have been employed
about 5 per cent less time than is normal.
The foregoing statements apply to employment in our shoe factories.
The situation is otherwise in our tanneries. As a matter of policy we have
expanded our tanning operations only sufficiently to supply about 80 per cent
of our "leather requirements, leaving a, margin of about 20 per cent of our requirements to be bought at opportune times from other tanners. The consequence is that we operate our tanneries continuously! to capacity and with a
full quota of workmen throughout the year.
This policy as followed in our tanning operations is perhaps the only policy
of this company which is sufficiently definite to be of any value to you in your
-deliberations on the problem of unemployment. As indicated above, the matter
of employment in our shoe factories is subject to constant adjustment and readjustment to meet changing conditions in demand, and these changes are dictated, not by any definite or well-defined policy, but by the expediency of the
particular current situations.

In brief, our plan is based upon the theory that the consumption of soap and
other products which we make is substantially the same each year and without
much seasonable variation. We can make an approximate estimate of the business anticipated for the succeeding six months and quota our production daily
upon that basis. Our sales department quota the monthly sales for each sales
unit, which unit is quite a small one. They are supposed to check up on on



their sales monthly and drive after those units which have not reached their
quotas. The result is the sales force is more closely followed than it was in the
past, and has naturally increased its efficiency.
In order to provide for any lull in the buying of our products, we have provided additional warehouse facilities, and, in the event of speculative buying,
to regulate our deliveries to individual customers in accordance with their sales
demands. In other words, the customer whose normal monthly sales of our
brans is 100 boxes, and who for speculative reasonsi places an order for 500
boxes, our deliveries to him would be limited to 100 boxes monthly, unless he
showed his actual need was greater. By regulating our deliveries on speculative
buying and by providing the additional storage necessary to take care of slack
buying periods, we have been able to operate during the four years the plan
has been in existence without shutting down excepting the desired weekly shutdowns the first of July and the end of December.
Under our plan all employees who have been in the service of the company
for six months or longer become eligible to the guaranteed plan of employment.
Since the plan has been adopted our turnover after six months' service in the
company has been reduced three-fourths. The m)en are happier, better contented, and more pleased with the guaranteed plan of employment than any
other feature that the company has adopted for their benefit, and might mention that the company has the profit sharing, sick benefit, life insurance, accident insurance, and disability and old-age pension. The company has profited
largely under the plan; it is difficult to estimate how much in dollars and cents,
but the reduced cost of production secured through regularity of work with
the same steady employee is very great. I think I am conservative in stating
that it has reduced our cost of production from 3 to 5 per cent.

1. For a business such as ours, irregular employment for a 25-year period
prior to 1922 would follow very closely the employment irregularity record of
other firms in our class, such as paint and varnish, household specialties, etc.
In reviewing our own record for the period prior to 1922 it appears to be
spotty but with an underlying trend of increasing sales to offset any apparent
acute unemployment situation.
It seems to me that the best way ot visual "ze the results we have secured
through methods intended to eliminate employment irregularities is to refer
to the enclosed Ten Year Sales by Months and Quarters (based on a new fiscal
It is a 10-year sales history starting each year^ with February sales. At the
right of the graph is a 10-year average, 1929 budget, and a mathematical
budget. It is interesting to note that for the years 1925, 1926, 1927, and 1928,
barring the first quarter, the succeeding quarters are almost identical as to
per cent. It is also interesting to note that prior to 1922 there was more fluctuation in the quarters than in the years following.
Our organization has done a great deal of work along the lines of steadying
employment througn stabilizing production. Our unemployment plan went into
effect in the year 1922. We have continually, for the past 10 years, increased
the number of products we manufacture, and in doing so train our employees so that we can easily shift them from one department to another as
conditions change. We find that advertising campaigns during periods of usual
depression tend to hold up a uniform production. All of these methods depend,
primarily, upon the ingenuity of the organization and, secondly, upon the state
of general business. We have applied them all at various times and through
their use have kept the need for unemployment extremely low.
We do feel, however, that there should be something more permanent and
more definite for the average working man and that his welfare should not rest
solely on these methods. Our answer to this question -*s unemployment insurance, and we have worked it out definitely and practically in our own organization and, although we rarely have occasion to use it, it is there to be used in
the time of general business depression or a crisis. The fund provided for in
the disability and unemployment clauses in the constitution and by-laws are
accumulated by the deductions from salaries of our employees in the various



classes and by the contribution from this firm to the extent of an amount per
year equal to the amount contributed by all the employees combined.
3. I believe our one biggest problem is a factor that is inherent in our
business. Our products are used in the spring and fall more than any other
seasons. We overcome it largely by:
(a) Building up stocks when sales are low, thereby relieving irregularities in
(&) Shifting employees to different jobs as conditions change.
(c) Developing new products continually.
(d) Advertising campaign during usual depression periods, viz, feature our
floor polisher as a Christmas gift.
(e) Vacation period comes in July, usually a depressed month. All employees go on two weeks' vacation at the same time, except for few in shipping
(f) Salesmen's prize contest when sales lag, thereby not becoming overproduced.
4. Answered in answer No. 1.
5. Although I speak without a great deal of experience, I can not see why
all the measures listed above can not be applied, with necessary modifications,
to any business. Although our business is relatively small to some, I thoroughly believe in unemployment insurance and think it should be a law.
Lacking this, I believe in Mr. Hoover's idea to bring about the creation by
Federal, State, and local authorities, of a reserve fund of $3,000,000,000 to
be used for public construction in times of overproduction and unemployment.
Our Italian sales agent was in my office a few days ago and boastfully told me
of a plan by Mussolini to drain marshes near Rome, thereby giving more land
to the farmer and also the Government will employ 65,000 people to do the
(The appended chart showing the annual sales of S. C. Johnson and Son
was submitted by Mr. Johnson.)




Your committee has asked me to talk to you to-day about forecasting and
planning and of the relationship of these activities to business success. For a
number of years, in the General Motors Corporation, we have had a plan in
operation for forecasting our future consumer demands and for planning and
controlling our activities in accordance with the indicated expectations. From
our experience with this plan we believe that its results constitute a distinct
step toward the stabilization of the automobile industry.
Forecasting and planning is the essence of modern-day business management.
It is not the function of an individual or a department—it is the conscious,
cooperative work of an organization. The American manufacturer can no
longer determine his course according to his ability to purchase the necessary
raw materials and the capacity of his manufacturing facilities. No longer
may he rest assured that there will be buyers for his products so long as
he can manufacture them with reasonable cost efficiency, and barring a general
business depression. Competition is keen and the cost of manufacture is not
the only factor determining the success of the manufacturer. Efficient employment of capital is a consideration of great importance and a sound, economical
method of distribution, adapted to the particular circumstances, is essential. In
the final analysis the ultimate consumer, with a wide range of choice usually
afforded by a number of ingenius contenders, will exercise his preference on
the basis of the appeal which a particular product has for him.
Forecasting and planning is nothing more nor less than a system of control
whereby production, purchase of materials, and the employment of capital are
coordinated with sales requirements. Budgetary control is an apt phrase except
that it is likely to imply a rigidity that must be guarded against. Flexibility is
a prime requisite, so that there may be a quick response, and thus the possibility
of adjustment throughout the system to the requirements of changes of situation that are inevitable. The focal point of the system is the sales outlet. The
flow at this point must be gauged and every other activity must be coordinated
with it. A description of our forecasting and planning system has been published
in pamphlet form, and is available to anyone who may desire it. I shall not,
therefore, burden you with details, but will undertake instead to bring out
some of the fundamental considerations upon which any such system must be
Ultimate consumer demand is the fundamental factor absolutely controlling the
continued sale of any product. This is not the demand of the manufacturer
who buys from some other producer, but that of the user of the final and completed product. Some types of business are more fortunately situated than others
as to the opportunity of analyzing the ultimate consumer demand for their
product. Those that are producing and selling products which represent a preliminary stage in the manufacture of a final product that in course of time
finds its way into the hands of the ultimate user are far removed from such
an opportunity. They are none the less dependent upon the requirements of
the final consumer; and it is poor solace to place the responsibility elsewhere
when an unrecognized state of demand results in a decrease in sales and an
enforced curtailment of production.


Consumers and producers in this industrial and- industrious land can not be
separated into two distinct parcels. We are a people of ambition, eager to work
that we may enjoy the comforts, conveniences, and luxuries of modern life. In
general, the consumer of one product is the producer of another product. The
man who wants an automobile, for example, is ready to work in order to get it.
He does not, himself, mine the iron ore, copper, and coal; cut the timber and
carry on the enormous range of operations that would be necessary before he could
personally make a complete motor car. Even if he could do so, the time spent in
so doing, or in fact in attempting to make, for himself and by himself, any product he is not skilled and efficient in making, would be time ill spent, from the
economic standpoint. But the fact remains that 'the average consumer does
produce his ow% automobile, or other desired product, with his own labor, by



devoting a few days, weeks, or months to some business or trade to which he
renders service and for which he obtains the price of the desired product.
Through the services of others in specialized fields, and the utilization of efficient machinery, he is thus able to secure an automobile at an amazingly low
price in terms of his wage-hour equivalent. He pays for the raw materials,
hires the labor, the tools, and the capital required, by means of so many hours
of labor performed in the production or distribution of some other article or
It is a significant fact also, that as industrial efficiency increases this consumer is enabled to obtain his desired automobile for a progressively diminishing equivalent of his own labor. Less labor is required to-day for a given
volume of production in most lines than was required five years ago; still less
will be required five years hence. This is in accordance with the law of progress. It means not merely the lowering of cost to the consumer of desirable
articles, but it means that this producer-consumer is building up a progressively
increasing surplus of consuming power enabling him to secure other products
that he could not previously afford. Thus efficiency of production, by increasing consuming power, enables industry to continually diversify and expand. I
am taking the motor car as an illustration of this truth merely because it
comes naturally to mind. The same principle holds good in any line of business and for any product.

The diversification of industry made possible by this economic law of diminishing labor per unit of production, has a direct bearing upon employment.
For while regularization of employment in industry depends upon the correct
adjustment of supply to consumer demand, the growth of employment and
wages depends upon continuing increase in efficiency and diversification of production as well as upon the growth of consuming power. There has been a
tendency evident in the daily press recently to raise the question of the benefits
of efficiency on the grounds that our progress in this direction is resulting in
unemployment. Unemployment which progressively and in temporary stages
may result from efficiency is of constructive benefit in itself. It results adversely only when industry fails to grasp the opportunity thus presented of
increasing and diversifying production and building additional consuming
power by the employment of the labor thus rendered vailable. A knowledge
of consumer needs and adaptability in meeting them is required to take constructive advantage of such an opportunity.
There is, however, another kind of unemployment that is an unmixed evil
from the economic standpoint. It is that which results from a temporary curtailment of production. The labor thus rendered idle is not available for the
production of other products which might attract the public fancy, except at
the expense of a labor shortage or deficiency in the original line when resumption of activity occurs. Overproduction due to mistaken appraisal of consumer
demand, style changes, the development of substitutes, or insufficient information regarding accumulated stocks are causes of this sort of forced curtailment
and unemployment.

Periodically in the past we have had glaring examples of the wide-scale
overproduction ushered in by these or other causes. Also, it must be remembered, a spotty condition usually exists at all times, some industries being slack
when the majority are enjoying good business. When a state of overproduction becomes fairly general, or applies to a number of principal industries, we
are usually in for a depression. Thus begins a vicious circle, of which the
economic consequences are intensified by an endless chain of related influences.
For overproduction means subsequent curtailment of activities, with resulting
unemployment. This, in turn, lowers the purchasing power of large numbers
of consumers, with consequent reduction in demand, so that still further curtailment of production is necessary. During this period also occurs the necessity of liquidating surplus stocks, an additional depressing factor. This may
bring the permissible production rate down to a level substantially below even
the existing lowered rate of ultimate consumption.



Such depressions, .like the boom periods alternating with them, are characteristic of the business cycle. Of late years business men and manufacturers
have come to pay considerable attention to these periodical fluctuations. We
are well aware of their economic consequences upon business, and we are all
more or less subject to their influences. Therefore, as long as we have the
business cycle (and probably we can never obviate it completely), we must
take it into account so far as we are able. Unfortunately the statistics which
are available, and which are employed quite generally as indicative of general
business conditions, have a serious inherent weakness. For example, pig-iron
production, freight car loadings, and bank clearings outside of New York are
primarily indexes of production. Building permits and records of building construction reflect the state of confidence on the part of capital as to the demand
for such structures, but there is always the chance of disappointment. If a
state of overproduction exists, and a period of inflation is taking place, we may
obtain no indication of it by a study of such statistics.
However, to complete the background, let us look upon the other side of the
picture and imagine that we have an ideal condition brought about by correct
forecasting of consumer demand. We have a perfect coordination of production
and consumption and therefore are able to avoid fluctuations in employment.
Sustained employment means sustained purchasing power, and the ability of
consumers to obtain what they want by exchanging an equivalent of work for it.
As the population grows, and as the efficiency of production constantly increases,
we have a continual increase in the demands that airse from desire and the
ability to satisfy that desire because of the opportunity for profitable employment. With this increasing demand comes the necessity of additional production facilities and for the employment of labor and brains in fashioning new
products to attract the public fancy and to serve useful purposes.
We know that production creates purchasing power. We also know that
production is influenced by factors some of which are controllable and some of
which we are as yet unable to control. The production of agricultural products,
for example, is subject to some uncontrollable influences such as unsual
droughts or frosts. However, agricultural production is also subject to other
conditions that are controllable, particularly in a country such as this, with it?
varied climate and natural opportunities for the diversification of crops. Great
progress in the direction of the control of agricultural production has in fact
been made in recent years. If we could have a reasonable control of agricultural production, and in addition a coordination of business so that industrial
production could be regulated and adjusted to fit the demands of the ultimate
consumer, the serious consequences from overproduction ,as influencing the
business cycle, would be removed.

When I speak of production being regulated to fit the demands of the ultimate
tuasumer, I do not mean merely the quantity of goods to be produced. In many
lines of business it is even more important to consider the elements of utility
and style. This is an age of invention and improvement, and we deal with a
fastidious public, which, after all, is one of the basic causes of our industrial
progress. Thus what might appear from statistical indications of past consumption to foretell a continuing demand for a given product may be altered
overnight, so to speak, by a change of public taste and preference for some
substitute or improved article.

While a good many people still regard the scrawling signature of the business
cycle as almost the handwriting of fate, dictating good business or bad, there
is on the other hand a growing tendency to look upon it as an effect rather than
a cause.
I hold to the latter thought. With the elasticity which we have in our banking structure there can be no cause for the major disturbances of the business
cycle except as brought about by the condition of business itself. The basis of
my discussion is directed from this line of reasoning, and has as its main object
an attempt to gain your acceptance of this premise, namely, that while
business is subject to the influence of the business cycle, the business cycle
itself—to the extent at least that its fluctuations are of any serious conse



quence—results from lack of knowledge and from errors of judgment on the
part of business management.'
We should continually strive to obtain a better knowledge of the fundamental
circumstances surrounding our individual businesses. To the extent that facts
are revealed and used in determining the course of business management,,
errors of judgment are automatically eliminated. The efforts of the Chamber
of Commerce of the United States in promoting the gathering of " more and
better statistics" by both government and business, have given substantial
impetus to this profitable purpose. Cumulative forces will be directed toward!
the stabilization of business as a whole in the degree that the essential factors
of management, based upon revealed facts, are coordinated within our individual
A theoretically perfect coordination of business comprehends an exact knowledge, in advance, of what the public wants (within the limits, of course, of
human ability to supply) ; an exact knowledge of how much the public wants
(within the limits of human ability to purchase and consume) ; and a regulation
of production in accordance to fit these ultimate consumer demands for both
kind and quantity of goods. If we had this ideal situation, as applied to
business generally, we could stop worrying about the business cycle, because
there probably would not be any business cycle left to worry about.

The attainment of such an ideal involves means of determining demand and
of adjusting supply to fit it. The economic problem involved can be illustrated
for any industry by the simple analogy of a large rAver flowing into the ocean
and having numerous branches or tributaries. The ocean represents consumer
demand as a whole; the river represents the flow of manufacture of the particular products that we may have in mind; and the tributaries and branches represent the flow of requirements from contributary suppliers at various stages
removed from the main product. The rate of discharge of this river of products
into the sea of demand is limited, on the one hand, by the rate of flow of the
tributary branches and streams into it, and on the other hand, by the smoothness, width, and depth of the channel and the conditions at the mouth of the
river. If the tributaries and feeder streams of this river supply less water than
the main channel and mouth can take care of, we have the condition of demand
exceeding supply.
If these feeders and tributaries, on the other hand, discharge more water than
can be passed through the mouth of the main river, we shall a backing up and
flooding, first of the adjacent lowlands and eventually of the valleys of the
tributaries. This is analogous to the piling up of inventories experienced in
periods when supply exceeds demand. Ideal conditions for the flow of such a
river of industry call for the operation of two distinct activities or influences
incident to what we may call flood or volume control. We want our river, of
course, to discharge as much volume of product into the sea of demand as iscontinually possible—therefore one set of activities has to do with the deepening and smoothing of the main channel and the removal of obstructions and
bars at the mouth, where it empties into the sea. This pictures the continued
improvement of our product in its consumer appeal through style or design
betterments, cost and price reductions which enlarge the market, better advertising and merchandising efforts, etc. The second set of activities has to do
with maintaining an even flow of water in our river without any shortages and
floods. This requires a constant checking of conditions at the mouth of theriver to determine the proper rate of flow, and a means of controlling the flow
of volume in the upper reaches and the tributaries in accordance with existing
conditions at the mouth.


It is evident that conditions at the mouth of the river of products must
determine the rate of flow of all tributaries, even of the smallest branches andstreams, representing raw materials most remote from the main channel, if we
are to hope to attain and maintain the condition of an even, maximum flow of"
finished product. In other words, the ideal way of regulating production
through forecasting and planning is upon the basis of gauging and checking
ultimate consumer demand. This applies to the welfare of the tributary producer, who may be far removed from the main channel, just as much as it does;



to that industry which is immediately next to the ultimate consumer. Practical
considerations may prevent these remote contributors from attaining this ideal
at present, but this does not lessen the economic desirability.
The situation in 1921 illustrates the disastrous economic consequences of
wrong appraisal of consumption trends. False values were built up by the period
of inflation during 1919 and 1920, and exaggerated expectations of future
demands were created by the competitive buying of raw materials and semifinished products by manufacturers of all kinds. A state of overproduction
existed, but was not recognized. The actual consumption of goods such as
automobiles, clothes, and other consumable products was overstimulated by
wrong notions of available income. Retailers of various kinds stocked goods
to the limit and bought ahead of requirements because of a false impression
of consumption trends. They did not recognize, nor did many others, that a
bubble was being blown that would burst from its own internal pressure.
The expansion of credit, which reflected itself in the reserve bank statements,
while recognized by many, was not generally accepted as evidence of overinflation. The Federal reserve system was designed to permit of credit expansion to take care of legitimate production needs, and these needs, in the
optimistic spirit of the times, appeared to be legitimate. The cause of this
situation would not have existed if there had been a way to detect the true
state of consumer demand. Production would have been lower, there would
have been less employment and overtime work, and consequently, less consumption than actually took place; but it would have been legitimate consumption and the serious economic loss and acute condition of unemployment
incident to readjustment would have been obviated.





I t is axiomatic that, other things being equal, the nearer the producer is
to the ultimate consumer of his product, the better is he able to regulace his
production in accordance with consumer demands, and thus to minimize the fluctuation of his production volume. In fact, the accumulation of unsold stock
in the hands of the retailer forces both its own recognition and an automatic
curtailment of buying for resale. This in turn, forces a curtailment of production on the part of the final manufacturer, there resulting in his factories in
all probability, an expansion of inventory as a result of commitments already
made and of delayed action in conforming to the consumer trend.
Then, in turn, there is the intermediate manufacturer who is selling fabricated parts to the final manufacturer; in his case, there is delayed action and
expansion of inventories due to commitments previously contracted. Thus
it is that the manufacturer who is at the first stage of a complex chain of
manufacturing operations—and the furthest removed from the ultimate consumer—is the least sensitive to a change in the nature of consumer demand
and the last to recover from an enforced period of subnormal production.
For between his position and the point of ultimate consumption there has
been a backing up of successive inventories. These constitute an accumulative
surplus of supply which must be liquidated before his production rate can be
resumed in terms of current demand.
Visualizing the situation in terms of our river, the overflow must be drawn
off all along the line before the initial manufacturer is in position to resume
production at the rate at which the consumer, at the mouth of the river, is
calling for the product. The chain of circumstances represented by this
backing up of supply occurs necessarily as a result of overproduction, regardless of whether the condition is incident to an actual change in rate of ultimate consumption or to an overoptimistie expectation.



It was considered quite remarkable that the automobile industry, in the
later part of 1921, was among the first to show signs of recovery from the depression. The fact is not so surprising when we think about it in terms of the
principles I have just discussed. The manufacturer of automobiles has nothing between him and the ultimate consumer except a dealer organization. There
is no occasion for the accumulat'on of stocks in the hands of numerous intermediaries, and there are physical limitations, apart from other considerations,
that limit the accumulation of stocks in the hands of dealers. The trend of
retail deliveries of automobiles dropped by the end of 1920, or putting it more



accurately, deliveries in 1921 fell far short of earlier expectations. There
was considerable grief throughout the industry because of what proved to have
been abnormal material commitments and overexpanded inventories. But the
surplus water was drawn off in a comparatively short time and by the end of
1921 automobile production was proceeding at practically a normal rate, seasonal conditions being taken into account.
Again in 1923 this industry went through a period of overproduction. In
this case the rate of sales to dealers was incorrectly interpreted, the manufacturers planning production on the false expectation of a continuing growth
in sales such as had occurred during some months preceding and during the
autumn of 1923. As a result of this overproduction, the industry suffered a setback in 1924 on account of the necessary liquidation of stocks.

Perhaps it was in consequence of our experience in 1920 and 1921 that we
iirst became conscious of the peculiar advantages which the automobile manufacturer has in the matter of forecasting and planning his operations. At any
rate we began in 1921 to accumulate all the information available as to the
retail sales. Reports obtainable from dealers in those days were meager, and
such information as we had from this source was not very reliable as an
indicator of the over-all situation. We had State registration data, however,
from many States which proved of real assistance in our efforts to develop
retail sales trends, from the statistical standpoint, and we went seriously about
the job of getting more complete reports from dealers.
Until the depression of 1924 the automobile manufacturers had not come to a
full appreciation of the advantages they naturally possessed, in the means of
analyzing consumer demand. General Motors had been studying those advantages and measuring the opportunities, but it took a second period of overproduction, from which we suffered as much as other manufacturers, to force
a recognition of those opportunities upon us all. In our own case production of
cars in 1924 was 26 per cent below 1923; whereas retail sales in 1924 were only
10 per cent below 1923.
Prior to 1924, however, we were carrying on what is still in effect as a part
of our statistical activities—a practice of making monthly forecasts of sales,
production, capital requirements and net earnings from operation. These
forecasts are submitted on the 25th of each month by each of our operating
divisions and are consolidated into a composite forecast for the corporation as
a whole. They cover a period of four months, including the current month
each time and three months ahead. This system was inaugurated in 1921,
and at that time the stipulation was made that no division could commit
for materials beyond the indicated requirements of the forecast period without special authorization of the finance committee. We have what we call a
decentralized type of organization, and it is a basic principle that the management of each division should have wide latitude and the opportunity to exercise
their judgment as to the various phases of operations, limited only by such
policies as can be laid down in concrete terms in the interest of the corporation. The restriction in respect to material commitments has proven to be
thoroughly practical. It is very rare that special authorizations are requested, and the corporation is protected effectively from an unreasonable
expansion of inventories resulting from disappointment as to expected sales
of our products.


The weakness of our forecasting scheme in the earlier days lay in the fact
that we did not predicate the sales forecasts upon an analysis of consumer demand. We did not have a clear conception of the ordinary seasonal characteristics and were liable to a sharp reduction in sales to dealers resulting from
an unrecognized accumulation of stock in their hands. Forecasts of net earnings were correspondingly faulty, and our production schedules and employment of labor suffered fluctuations not justified by existing fundamental circumstances. We did not know the rate at which our product was actually
passing into the hands of the ultimate consumers, nor d.d we know what the
stocks were in the hands of our dealers, nor the extent to which these stock?



could suitably be allowed to expand or contract in order to secure the important over-all advantage of a more consistent rate of production at the factories.
I have said that our analysis of consumer demand was not put to effective
use until the spring of 1924. It is fa r to say that our operations since then,
showing, as they do, a substantial betterment in rate of inventory turnover, a
steadier rate of factory operation and other economic betterments, have proven
the constructive benefits of our practice.
Before giving you a description of our methods of forecasting consumer
demand, I should state that we recogn ze two aspects in connection with these
activities. One of these may be called the statistical, the other the constructive
aspect. The statistical efforts, as the name implies, are directed towards ascertaining the statistical facts bearing upon future consumer demand. The constructive efforts are d:rected towards improving the probabilities. Both of
these efforts go hand in hand, and our final forecasting is based upon their
dual operation. I will first touch upon our statistical methods.


At the beginning of a sales year, we attempt to arrive at an estimate of the
probable retail sales for each car division for the ensuing 12 months. If
there is the problem of introducing a new model in a given line, it must, of
course, be considered in forming our judgment of probable sales. We must also
take into account the competitive situation and the condition of business in
general as affecting our own industry. The capacity of our own dealer organization must be considered in the light of any impediments likely to restrict or
hamper its sales effectiveness. Then, too, we must study the probable influence
upon sales appeal of special mechanical features of the product, as well
as the factors of style, general performance, and serviceability. As a result of
the best judgment that we can bring to bear on the case we arrive at what
we call a divisional index. This divisional index means our best guess of
what the retail sales, for a particular line of cars, will be during the ensuing
sales years. This does not mean that we set up an arbitrary quantity in
accordance with which the production is determined, regardless of what may
afterwards happen. This divisional index is under continual scrutiny, and is
adjusted immediately when the trend of events demonstrates the desirability of
revising our expectations.
Subject to these adjustments, the divisional index at any given time is
accepted as dictating the basis upon which production should be scheduled.
In other words, our production is always scheduled with regard to the expected
requirements for the complete sales year. This does not mean, however, that
production in any given month should be exactly one-twelfth of the year's production, for in our business there is a seasonal variation which must be taken
into account, and it is usually desirable to shade production somewhat during
the dull season so as to modify the seasonal accumulation of stock. A compromise is perhaps best between the desirability, on the one hand, of a level
rate of production in the interest of manufacturing economies, and a fluctuating
rate of production in the interest, on the other hand, of minimum stocks in the)
hands of dealers.
I have referred to the fact that on the 25th of each month a complete forecast
is submitted by each of our divisions for the current month and three succeeding months. This includes a forecast of retail deliveries by dealers. We also
have very complete information as to actual retail deliveries, by months, in
the past. Thus at all times we have available the actual records of the past as
well as a forecast of retail deliveries for three or four months ahead. The
accumulation of these records of retail deliveries by our dealers, covering a
number of years, and the analysis of State registration data have given us a
very good means of appraising the ordinary characteristics of our business.
We have found from experience that as we proceed with the continual analysis
of deliveries and forecasts and measure our performance and prospects in the
light of seasonal,expectancy, we can detect changes in trends and recognize disappointments or improvements well in advance of what could be possible
through any other means.

For example, let us suppose that it is the latter part of November. The
divisional index was laid down August 1—which, by the way, is considered
the beginning of our automobile sales year. We have actual retail deliveries for



August, September, and October. We will assume that this record was such
as to support the expectancy of the divisional index. When the forecast for
November, December, and January was prepared a month previous it appeared
to be reasonably in line with past actual experience, seasonal conditions, and
any other known influences being considered.
Since we get reports of retail deliveries from our dealers three times a month,
we know what these were during the first 20 days of November. If they are in
line with the forecast for November, there is no need yet,' from statistical
observations, to modify the divisional index. If the actual deliveries during
that period are out of line with the forecast for November, that is the first flash
or caution signal indicating that the divisional index may require modification.
And so we proceed month after month analyzing past performance and forecasts of retail deliveries—and during each month comparing 10-day delivery
figures reported by our dealers with the latest forecast for the month. Ordinarily we do not actually modify the divisional index because of a statistical
indication covering a brief period of time. We take that, as I say, as a caution
signal, and watch the situation as it develops to see whether there seems to be a
sustained change of trend.
An estimate of sales a year ahead is always a guess. That is why we give
the name " divisional indexes " to these 12 months' estimates—to distinguish
them from forecasts. As the year progresses there is a progressive diminution of the uncertainty, and our divisional index, modified as it may be from
time to time, becomes an increasingly sound foundation on which to base our
production programs.




I have said that these indexes and forecasts are not derived solely from
statistical observations. The constructive aspect is no less important in a
measurement of probabilities.
Going back to our analogy of the river emptying into the ocean, the constructive part of forecasting and planning consists in deepening the channel
and improving the mouth of the river so as to facilitate a maximum practical
and sustainable flow. The statistical phase of forecasting lies in the continual
sounding of this channel and the regulating of the flow of main stream and
tributaries to accord with conditions as found and as made.
The constructive efforts in forecasting and planning take on, in turn, two
aspects which I may call, respectively, long-term and short-term factors of
influence. Both of these are designed to favorably affect the consumer demand
for our products.
Among the long-term factors of influence on consumer demand may be mentioned the extensive program of research that is maintained in order to increase the consumer appeal of our products through improvements in design,
functioning serviceability, style, etc. I call these long-term factors because
from their nature they require a continuing program of some duration before
their influence can make itself felt on consumer demand. The ultimate effect
of these factors, which include a continuing study of product obsolescence, is
of utmost importance upon consumer demand and must be taken into account
in constructive forecasting. Unlike the short-term factors, however, they
can not be called into play quickly to offset cessations in demand due to sudden
and unforeseen depressions, characteristic of the minor fluctuations of the
business cycle.


In connection with these long-term factors of influence, the engineering
and the sales departments work hand in hand. The engineers are, of course,
ahead of the salesmen, from the standpoint of time, in the development of
improvements calculated to anticipate as yet undeveloped consumer needs and
wants. The sales department, however, through its intimate, first-hand contact with the consumers, is in the best position to appraise the present worth
of projected improvements in terms of consumer reaction to them.
Particularly in the matter of style trends is the sales department able to bring
to bear an adequate sense of consumer requirements. In the automobile industry, for example, engineering research could not anticipate the sudden trend
toward the closed car that took place some years ago. The sales department,
however, quickly sensed it. On the other hand, development of balloon tires



and four-wheel brakes, which had a tremendous influence on consumer demand,
was chiefly an outcome of research and engineering development.
Short-term factors of influence on consumer demand are those that may
quickly be called into play to offset unfavorable developments as they become
apparent. Going back to the river again for illustration, while we keep dredges
continually at work on a long-time program of channel deepening and widening,
it may be necessary, on occasion, to send out a flying crew with some sticks of
dynamite to blow up a sudden obstruction. These explosives correspond to the
use of special sales stimulus, more intensive advertising, or even temporary
underpricing, whenever these seem called for by a falling off in anticipated and
logical demand.
A policy of utilizing to the utmost the stimulating factors that I have just described as influencing demand must be adopted, in forecasting and planning its
sales and production, by any industry that is not merely content with taking
things as they come.
I do not wish to convey the idea that forecasting and planning is of value only
in so far as it may be tied up to the yardstick of ultimate consumption. It may
not be possible in some industries to arrange such a tie-up as yet, especially in
those stages that are remote from the final sales outlet of the completed product.
As a matter of fact, forecasting and planning activities may be even more
indispensable in such cases. The ideal condition, however, is that which permits consumer demand to be measured, so that the planning may be actually
based upon the trends thus indicated. In our own industry, we are fortunately
able to do this, because the distribution of our product is through dealers who
devote substantially all of their activities to the sale of a given line. They
report directly to the manufacturer and recognize the importance, in their own
interest, of having the fullest use made of the yardstick of retail sales. Thus
we are able, through simple means, to coordinate our forecasting and planning
procedure with the important factor of ultimate consumption.
In General Motors we recognize and distinguish the benefits that come from
the systematic measurement of consumer demand and those that result from
forecasting and planning. Among the former, I may mention again the considerable stabilization of employment in our factories in spite of seasonal
fluctuations, and the marked stimulation in inventory turnover, both in our
factories and among our dealers. In other words, the more consistent rate at
which we are conducting operations has enabled us to manufacture and distribute a larger quantity of cars with a smaller amount of capital tied up in
inventories. Moreover, it seems safe to assume the inventory turnover of
supplies has been favorably affected, since this has been the effect upon our
own accessory and parts divisions.
I have described our methods of forecasting retail sales of our products,
and have mentioned some of the outstanding benefits derived therefrom. Our
forecasting and planning activities extend far beyond this, and afford many
benefits in the direction of control of our operations not dependent solely upon
the application of the consumption yardstick. The establishment of cost, expense, and investment standards, which is a part of our program, has not only
made possible the establishment of standard prices with which actual or proposed prices may be compared, but it has also subjected the fundamental policies of the corporation to the test of actual experience. Increased accuracy
in estimating, and a more thorough understanding of our fundamental policies
by all concerned have been noticeable results.

The comparative stabilization of any one industry necessarily has an influence upon the stabilization of industry as a whole. This must be of particular significance when applied to the automobile business which is so important to our industrial life. We feel that the more accurate appraisal of
basic requirements* and the coordinated control resulting therefrom have
formed a distinct step toward this end, but the imitortant question i s : Can the
principles, which have worked successfully in our own industry, be applied to
Let us test this thought by applying it to an extreme case in an industry in
which prevailing conditions present many intervening stages between producer
and final consumer. Take, for example, the manufacture of cotton yarn.
This product may go to a second manufacturer who operates what is known as
a " Gray goods " plant, and who weaves the yarn into unbleached fabric. The



product of the " Gray goods " plant, through a selling agent, goes perhaps to
a merchant converter, or finishing plant. The finished and bleached fabric,
which is the product of the merchant converter, may go to a cutter-up, which is
the trade name for the manufacturer of cotton apparel or furnishings. His
product, in turn, goes to the retailer, which may perhaps be a department
store or a mail-order house, and thence to the final consumer. In such a chain,
which is common to the textile industry, but not necessarily typical of it,
the manufacturer of the cotton yarn is six stages removed from the final consumer in the retail market. There are simpler hookups in the same industry,
but I have purposely chosen one of the more complicated to illustrate my
point. It is this: From the standpoint of the stabilization of industry, the
desirable production rate of every stage in the chain should be determined, not
by what the demands of the succeeding stage may happen to be, but by the
state of demand of the ultimate consumer. A style trend from cotton to
silk, for example, among wearers of garments is of just as vital importance to
the manufacturer of cotton yarn at the beginning of this chain as it is to
the retailer at the other end. The fact that the gray-goods manufacturer
may be calling for his product at a high rate is no safe economic indication
to the yarn manufacturer that he may increase his plant capacity.



Stablization, of course, is an ideal for future attainment. Practical considerations compel the yarn manufacturer, even though he were in position to
gauge the demands of the final market, to regulate his production according
to the orders from the gray goods manufacturer. For a similar reason, the
latter must control his production in accordance with the demands of the cutter-up. At last, however, in this chain of supply and demand, we get down
to the retailer, who is next to the final market. If the retailer (speaking collectively, of course) were able to apply the yardstick of consumer demands, and
then would regulate his commitments accordingly, it is evident that the demands made by him upon the cutter-up would be in step with basic trends,
and hence a sound guide to the latter in regulating his production schedules.
Similarly then, the commitments made by the gray goods manufacturer on this
basis would keep the yarn manufacturer also in step with the actual demands
of the final market. Thus it appears that the stablization of a multistage industry depends largely upon the proper regulation of commitment* in the
final stage in accordance with retail demand. After that, with properly applied
methods of forecasting and planning, synchronization becomes a matter of
one stage keeping in step with another.
I am not prepared to say what the technique should be in applying the
yardstick of consumption to the final stage of such an industry. With so
many important components in an industrial chain depending upon the one
factor of ultimate consumer demand, it might seem profitable to apply cooperative effort toward the solution of the problem. As a matter of fact, a number
of progressive department stores are now conducting systematic studies of
style trends and are regulating their inventories and commitments in accordance with the conditions of demand thus disclosed. This is an illustration of
efforts that are leading toward stablization.
I have heard it said that an ideal is something that you keep shooting at
but never hit. Fortunately for human progress, we possess an overwhelming
desire to keep on aiming and shooting at ideals, once they have manifested
themselves. Our own experience has been such as to lead us to believe, as
well as to hope, that some day American business and industry will approach
the ideal of stabilization sufficiently to free us from the bogey of the business
cycle. When this is brought about, it will be very largely due, I am sure, to the
closer and more economical control of manufacturing and merchandising operations that will follow a better appraisal of ultimate consumer demand. And
intelligent forecasting and planning—vital to industrial prosperity—is the
mechanism to bring this about and to remove the unnecessary hazards from
the course of American business. When this is accomplished the game may not
be as exciting as it is to-day, but it will be played with greater peace of mind
and result in greater prosperity. For we shall know where the ball is going to
go when we hit it.



I am afraid that accurate information on the questions that you raise is
difficult to obtain, although I believe that many of the unions have valuable information as to questions of employment, and that some of the research organizations have a little information, although I am afraid not any too much.
Attempting to answer your questions as best I can, in the order in which you
have put them, I should say:
(1) I have, no accurate information as to just how irregular employment is
in the building trades. I have been informed that the average employment of
masons is 65 per cent, and that this figure holds approximately for other trades.
My knowledge, however, is not sufficiently definite to make it possible for me
to make this statement.
(2) I know of very little systematic work to provide steady employment.
Mechanical improvements in the trade, referred to under No. 3, have helped.
There has also been a certain amount of propaganda by organizations, such as
the. New York Building Congress, to induce owners and contractors to do
winter work.
(3) Lack of regularity in employment in the building industry is due to two
sets of causes:
(a) Seasonal idleness caused by the weather and by the existence of fixed
rental seasons. These two factors tend to increase the amount of available
work during the spring, summer, and fall, and to decrease it during the winter.
Considerable progress has been made in cities like New York toward leveling
the curve of employment. The advent of the steel frame building, together with
improvements in the installation of concrete arches, have made it possible to
build through the winter with only occasional interruptions on account of very
bad storms. Even so, there is substantially less work in many trades during
the winter months, than at other times of the year. This is due to the fact
that residential rentals commence on October 1, and that builders plan to finish
their buildings at a date approximating the 1st of October. On the other hand,
the office rental season is generally May 1, and at times of heavy office building
construction, this somewhat balances the October 1 date for residential work.
The handicaps of freezing weather and snow removal, which entail considerable extra cost during the winter, are balanced by the fact that labor at this
period is more efficient, because of scarcity of work, and that owners of equipment, such as trucks, steam shovels, etc., being anxious to procure work, are
apt to eliminate profit during this period. These considerations also apply to
mechanics and contractors doing such work as plastering, painting, carpentry,
etc., which therefore can be done less expensively in winter than in. summer.
The tendency in New York City is toward increasing winter construction;
outside of New York, technical improvements in reinforced concrete building
have also tended to make economical construction during the w7inter.
(ft) Depressions in the industry, at which periods there is not sufficient work
to give steady employment to all. These depressions have sometimes coincided
with bad business due to the business cycle. Occasionally, the building industry has suffered through overproduction at some particular place, irrespective of general business depression. While it seems likely that depressions, due
to the business cycle, are less likely to occur in the future than in the past,
there, nevertheless, will occur periods of overbuilding, resulting in temporary
depression in the building industry.
Since the war, the building industry has been employed almost continuously,
owing to a shortage which developed during the war, and to a demand for new
buildings, which has resulted from general prosperity and expansion. It is
reasonable, however, to look forward to occasional periods of substantial curtailment of work. The suggestion of President-elect Hoover to regulate public
construction so as to reserve a certain amount of this work for periods that
there is little private work, seems to me an excellent one for overcoming
irregular employment due to this cause.
(4) It is difficult to answer this question, because of the exceptionally active
condition of the building industry during the last 10 years, and also because
of the difficulty to trace the effects, over a comparatively short period, of the
rather modest efforts that have so far been made to regularize employment.



The subject of your inquiry is recognized as probably the greatest problem
t h a t our company h a s to face. The months of November, December, J a n u a r y ,
and F e b r u a r y a r e relatively poor months for work in t h e building industry.
Our pay-roll curves indicate t h a t approximately 50 per cent of our normal
number of summer employees are laid off when construction work eases u p
with the approach of cold weather. State highway work and bridge construction is practically a t a standstill in t h e New England States during the winter
months. Industrial and commercial work is carried forward to a limited extent.
The situation as a whole is analogous to t h a t which exists in t h e automobile
industry, and the lines of production in t h e two industries follow practically
the same curve.
I n our own particular case, in order to alleviate unemployment we m u s t
first secure building contracts for ourselves, and this we t r y to do through
our advertising, two illustrative bulletins concerning which we inclose herewith.
We endeavor to sell an Owner the idea of building his new building during t h e
winter months at a cost of 3 or 4 per cent e x t r a for cold-weather expense.
The owner's production m a y then s t a r t in March or April, compared with
September or October if it h a d been a summer job, and the profits on production during the five or six advance months will in most cases repay for t h e
e x t r a cost of cold-weather expense.
Our company h a s been successful, through our advertising a n d salesmanship,
in getting a fair volume of winter work on this basis, and in m a n y cases it
h a s been found t h a t " cold-weather e x p e n s e " is negligible or even a minus
Quantity because of advantageous purchases of construction materials in a
weak market, and the opportunity to select highest-grade mechanics when
m a n y are seeking work.
Having secured some contracts, t h e problem of unemployment with us
immediately takes care of itself, but we do concern ourselves in so a r r a n g i n g
the various operations t h a t our men will have regular work without lost time.
T h i s means furnishing temporary heat and inclosures to afford shelter while
a t work and reserving some interior work for the days when it is impossible
to accomplish any work outside.
We answer the five questions asked in your letter of December 6, 1928, a s
1. How irregular was employment in your plant before you attempted to
stabilize it?
Answer. The irregularity of employment continues about t h e same as in
previous years, except that, compared with 20 years ago, we do more winter
work become there is more of it available.
2. By w h a t means did you u n d e r t a k e to provide steady employment?
Answer. Endeavoring to secure winter contracts through advertising and
salesmanship, on t h e basis t h a t winter work can be economically performed.
3. W h a t problems did you encounter in bringing about regular employment?
Answer. The problem of locating owners who might require additional floor
4. How successful have 3^ou been in your efforts?
Answer. We have been able to secure enough work to keep our home office
organization intact during the winter season and to keep our field forces up
to about 50 per cent of normal summer organization.
5. To w h a t extent can similar measures be applied to other plants "and other
Answer. A campaign to educate the public t h a t winter building is feasible
and economical and can be carried on to some extent by any builder, we think,
with some favorable results.
The building industry is represented in Washington, by the Associated General Contractors of America. You may probably find t h a t they have information which may be of value to you, because every contractor seems to have
the problem of winter building on his mind.

(Thereupon, at 12 o'clock m., the committee adjourned.)



Washington, D. G.
The committee met pursuant to adjournment, at 10.30 o'clock
a. m., in room 412, Senate Office Building, Senator James Couzens
Present: Senators Couzens (chairman), Tyson, Walsh of Massachusetts, and Sheppard.
Present also, Dr. Isador Lubin of the Institute of Economics,
Washington, D. C , assistant to the committee.
The CHAIRMAN. Mr. Stewart, will you give the reporter your full
name and your address?
Mr. STEWART. Bryce M. Stewart, Industrial Eelations Counsellors
(Inc.), 165 Broadway, New York City.
The CHAIRMAN. I understand that you were formerly director
of the Canadian National Employment Exchange System?
Mr. STEWART. Yes, sir.
The CHAIRMAN. YOU understand

the purpose of the meeting, Mr.
Stewart. We shall be glad to have you go ahead in your own way
and tell us what your experience has been.
Mr. STEWART. I have been trying to follow the hearings before
the committee, and have been impressed with the fact that the
gentlemen who spoke on regularization by private industry have
in most cases indicated that regularization itself means the squeezing
out of people, getting along with fewer people, and therefore throwing more people on the labor market itself; that in many cases those
people are older people; that when one does release people for regularization purposes, one of course is apt or will try to release those
that are least efficient.
The CHAIRMAN. D O I understand you to say that you got that from
our hearings?
Mr. STEWART. Well, from the hearings I got the idea that they
felt that regularization meant the release of more people on the
general labor market; and I would follow that myself with the
remark that that is likely to mean a considerable percentage of old
people among those released.
The CHAIRMAN. N O such testimony as that has been presented to
this committee.
Mr. STEWART. Not the latter?




The CHAIRMAN. N O ; I thought you meant in these hearings.
Mr. STEWART. N O ; but not the latter point, the first point, as I
understood it. They did say that regularization meant the release of
more people from their plants; t h a t they were getting along with
fewer and fewer by the regularization process.
The CHAIRMAN. N O ; there has been so such testimony as that, Mr.
Mr. STEWART. Then I should like to make that point myself.
The CHAIRMAN. Proceed, then.
Senator TYSON. Your point is that it will have that effect ?
Mr. STEWART. I t will have that effect; yes, sir; that the regularization process toward which private industry is directing so much attention means that by cutting down their seasonal peaks they have
more steady employment for a smaller number of workers, and
t h a t as they do release people it is only good business to release
those who are least efficient; and I think students of unemployment
are agreed that in time of unemployment the first people that are let
out among the workers are those that are least efficient.
To me that means an ever-increasing volume of work for some kind
of agency that works outside the individual plant. We have the
employment agencies within the plants in this business of regularization, but the community is faced as a result of that effort with
a larger element of unemployment, a greater shifting of labor, and
a corresponding need for better organization as between plants and
First I should like to detail something about the Canadian employment service experience. Then I would say something about
employment exchanges in general and their function, and probably
say something about the legislation proposed in one or two bills now
before Congress in the matter of public employment offices.
Canada has a serious problem of distribution, whether it is in
goods or in men. I t is' a long-shaped, sparsely populated country.
One does not work in a square, as in the United States. The hauls
are long, because the population is in a belt a few hundred miles
wide just north of the border. That means that you must think in
terms of long hauls; and the result has been that the railroad
organization has followed the demand for long-distance transportation for goods, and one likes to think that the same considerations
have led to a worker employment service as a general consideration.
Secondly, the seasonal character of employment in Canada by reason of the climate has emphasized the need for some such service. The
depression of 1913 and 1914 brought the matter pretty much td a head,
and employment-exchange legislation was considered by a number
of agencies at that time. I was with the Department of Labor of
Canada then, and was set to work studying the whole problem; but
in the meantime the war broke out, the war orders began, the unemployed were recruited in regiments, and in a short time there was
no serious unemployment problem. However, in 1918 we began to
anticipate the end of the war and the problem of demobilization, and
the work we had done in 1914 and 1915 was: resurrected. There we
found the recommendation for employment exchanges on a national
basis, and legislation on the subject was introduced and passed.
The law—the Canadian employment offices' coordination act, as
it is called—provides a Federal vote of $150,000 to the Provinces to



assist them in their employment-office work. The Provinces to participate in the Federal grant must conform to certain standards of
efficiency and they must permit Federal inspection. They must
standardize their procedure and their statistics according to Federal
regulation. The money is allocated to the Provinces, not on the
basis of population, as is so often proposed in those measures and,
as I might say in passing, in the proposed legislation now before
Congress. As you gentlemen know, in allocating your advertising
appropriation, or whatever it may be, it is on the basis of the needs
that you feel exist and the results that can be obtained in various
parts of the country as between various advertising agencies.
I n Canada we tried to do the same thing with our Federal appropriation. I t is allocated on the basis of the particular Province's
expenditure in proportion to the total expenditure by all the Provinces. That is, if all the Provinces should spend $300,000 on employment service and Ontario should spend $100,000, then it would
receive one-third of the Dominion Government's grant, the idea
being that if they wTere spending a third it was because the need for
the service was there.
Obviously, different localities and different industries require
different degrees: of employment service. One may be fairly stable;
the people are seldom let out. Another may be a seasonal industry,
and people are employed and released as the peaks and depressions
of employment require. Some 75 employment offices were organized
in cooperation with the Provinces. I n one or two Provinces, the
smaller ones, where the need was not felt by the Province itself, the
Government in view of the demobilization problem established its
own employment office. Now agreements exist between the two governments, the provincial and Dominion Governments, in all Provinces
but one small Province—that of Prince Edward Island, which has
only 90,000 people and is mainly agricultural.
There is a Federal director in the department of labor. He, in
cooperation with the Provinces, works out the standards of efficiency.
He also works out methods of clearance and distribution of labor
between the Provinces. The standard as to statistics, so that we have
a national figure comparable all through from one end of the country to the other, is also maintained; and they report regularly to
him. He has an office in Ottawa which acts as the clearing house
between the Provinces of the east, and an office in Winnipeg which
acts as a clearing house for the western Provinces. Each office reports daily to the clearing house of the Province, indicating the labor
that they have that they can not place locally, and the jobs that
they have that they feel they can not fill locally. These are compiled
in a bulletin and reported to every office in the Province, and the
office that feels it has labor to fill the job is authorized to telephone
or telegraph the office with the job and try to effect a placement.
The CHAIRMAN. Have you had any experience with the men which
will enable you to tell whether they would be mobile to that extent ?
Mr. STEWART. There are about 400,000 placements made a year, of
which approximately 100,000 are casual and the balance, 300,000,
are regular placements, so called.
Of the total of 400,000, the figures show that about half have to
buy railroad transportation. Not only that, but the employment
service has arranged with the big railroad systems of the country



for a reduced fare to workers who are being sent by an employment
office to employment at a distance. If one goes more than 116
miles, and has a fare of more than $4, therefore, he is entitled to this
cheaper rate of transportation, which amounts to a reduction of
about 25 pet cent from the regular rate. About 10 per cent of the
placements use that cheap rate, which means that they must move
more than 116 miles.
I n the harvest season in the Canadian grain-growing Provinces
of course there is a very marked migration of labor, both from
the east toward the west and from the extreme west toward the
central west. The farmers in the east used to complain about the
extent of the movement, and through negotiations by the director
of the employment service the railroads began to recruit on the
western coast as well, so that now there is a much more efficient
distribution, the western labor supply for the harvest moving east
to the territory contiguous to the west, and no farther; the labor
from the east moving to the Provinces contiguous to Ontario, and
no farther; so that the overlapping and disjointed arrangement that
formerly obtained has been pretty well cleared up. I n that movement we may move, inside of one month, as many as' 35,000 or 40,000
harvest hands at decidedly reduced transportation rates.
Senator TYSON. D O they give them the same fare back, in the event
the men want to go back?
Mr. STEWART. The fare is slightly higher on the way back, but
it is a very much reduced fare; the idea being that they have had
two months' employment and should be able at least to pay their
way back. The railroads try to get some compensation for the very
much reduced fare. I think it is only about $15 from Montreal to
Winnipeg, and a cent a mile past Winnipeg. I think you can get
back, say, for perhaps $20, or something of that sort.
Senator SHEPPARD. W h a t about quarters or accommodations for
these harvest hands ? Do you give any concern to that ?
Mr. STEWART. Nothing has been done thus far. I think that is
a very important question—something that, before I came away, I
was thinking seriously about. I left that position in 1922, and
should have liked to take that on as the next step.
If I may say in two sentences what I had in mind, I had hoped to
work out with the farmers' organizations a system of canteens with
tents at central points through the Provinces in the west, say the
militia department furnishing the tents after the summer camps
and the farmers' organizations supplying the food at cost; that as these
excursions moved into the west the men should be unloaded and go
into reserve in these camps; that at each of these points there should
be an employment office, an employment agent, tied up to the permanent employment office nearest that point; that the men should be
moved out as the farmer demand came.
Of course it is a very irregular thing, on account of weather. The
farmers do not like to be paying men $5 a day when it is raining.
There needs to be some system of that sort for them to move into
reserve and out as demands require, according as the demand has
registered and according as the weather permits.
Now they lose a great deal on account of the weather. The farmer
sometimes charges them for their board when they are not getting



wages, and they sometimes come back quite disappointed. Some
supplementary organization of that sort should be worked out.
Senator SHEPPARD. Sometimes the accommodations are very poor,
too, are they not?
Mr. STEWART. Quite so; because farmers are of all classes, like
everybody else.
The whole cost of the system is about $400,000 a year. That means
that, counting casual placements and regular placements, it costs
about 10 cents to effect a placement. A third of that, approximately—a little more than a third, perhaps—is paid by the Dominion
Government; or, to be exact, $150,000 is the annual Federal grant.
On that basis, of course, taking the population here, twelve times
that of Canada, we would have, say, a $5,000,000 cost for a similar
Now I think I should turn to a general argument for such a system;
and perhaps it would be better to enumerate some of the functions of
a national system of employment offices.
Its primary function, of course, is to organize the labor market
on a national basis; but it has this secondary function of being a
central agency in combating unemployment by whatever method we
may combat it. I t is primarily an information service. I t is not a
matter of the Government going into business; but the Government
does tell the farmers things about their occupation; it tells them about
their soil; it tells the people interested in navigation as to how they
should proceed; it tells the people interested in mining as to where
they shall get the best results. This service tells employers seeking
labor where it can be found, and tells people seeking employment
where it can be found if at all available. I t is information about
jobs and information about people seeking jobs.
Local maladjustment is bound to exist when the market is not
organized nationally. That can be ironed out a good deal, if you
have a system of this sort, by this movement that we have just
indicated that takes place from points of oversupply to points of
There is maladjustment not only by reason of this maldistribution
of the labor supply but by reason of agencies working at crosspurposes. The commercial employment agencies are, of course, not
organized in any national system. I t is quite possible for a St.
Louis agency to be shipping labor into Chicago, and the Chicago
agency to be shipping labor into St. Louis, of the same kind, on the
same day. There is no relationship between the two. That also
obtains for nonprofit-making socially minded employment offices
dealing even with professional people and with industrial classes of
workers. They are not coordinated in any way; and there is this
waste and hardship by reason of the fact that this worker here could
obtain a job, were they working in cooperation, near at hand; but he
is being shipped out to another point a distance away, and another
worker from that point may be shipped in to the job near his home.
I want to refer, just in passing, to the maladministration that
comes about through public advertising of employment, the competition that exists there, and the maldistribution which results in the.
same way.
There we could have, through a national system, some effective
coordination in the labor market which might be analogous to what



we have in banking through the Federal reserve system. Essentially, that system interlocks a lot of different banks in a system
that functions nationally; and you would have, on the one hand,,
labor and industry enjoying in the labor market what is enjoyed
through the Federal reserve system in matters monetary.
I should like to emphasize that it is not only for the industrial or
agricultural worker, the wage earner. The salaried classes obtain a
great deal of assistance in this way. We have experimented a little
in Canada with that. One of our offices is entirely for teachers in
the Province of Saskatchewan. There, by reason of the climate,
again, the schools in the agricultural districts are closed a good part
of the year, certainly in winter; and there is a great migration of
teachers in from the east in the summer time, and then out when the
teaching period is over. This office deals with teachers entirely in
cooperation with the department of education of the Province. W e
have experimented somewhat in the same direction with other professional people; and we find that there is a great deal of migration
of a certain type of professional classes. A mining engineer is a
migratory person. A civil engineer is a migratory person. Their
jobs very often are what a wage earner would call a casual job.
So the effect of it is largely to annihilate distance for both parties
through the system of clearance that I have indicated; and I might
add that that system can be extended into the international sphere.
I n Canada, just after the war, we became aware that a great
many people in England wanted to migrate. We had, on the side
of the employers in Canada, a demand that people should be imported. The question always arose, before we had a national employment service, as fo whether the need could be supplied in
Canada. The immigration department ordinarily would call for
evidence of effort to secure the labor in Canada. They would call
for newspaper advertisement, or something of that sort; but that T
of course, had to be a local affair, and could not very well be a
national effort.
N o ^ , when the immigration department receives an employer's
demand or request for permission to import certain labor from the
United States, from Great Britain, or from Italy, the request is
referred to the employment service; and if the national director says
that that labor can not be secured in Canada, if the conditions are
fair and reasonable, and there is no reason why the labor should not
be imported, then the immigration department proceeds on that
We had an experiment of this kind. The British labor exchanges,,
when people in England indicated their desire to emigrate, would
ask them the country of preference, and their occupations, of course.
That information was compiled and forwarded to the employment
service at Ottawa. That information was distributed to every employment office superintendent in the now 64 offices of the system.
I remember that we had a demand for an expert dyer in a dyeing
establi$hment in Winnipeg. We could not locate, throughout the
country, any such person who wanted to move to Winnipeg. By
scanning the list supplied by Great Britain we were able to pick out
a man, to notify the English exchanges, and to have him dispatched
to Canada from abroad to fill the job. I think one of the important



functions of such a system is to give the basic data needed for proper
formulation of an immigration policy.
Senator TYSON. D O you have restricted immigration in Canada?
Mr. STEWART. We always have allowed agricultural workers and
domestic servants to come in; and there has been a money qualification for some year$. There is a great deal of discretion left to the
immigration authorities; but there is rather a frowning on immigration for industrial workers, and encouragement of agricultural and
domestic help immigration.
Senator TYSON. Then you do not have any quota system, as we do?
Mr. STEWART. We have no quota system.
Senator SHEPPARD. I t is a selective system; is it not ?
Mr. STEWART. Rather.
Senator TYSON. And discretionary with your commissioner of
Mr. STEWART. With the immigration department, which is not the
labor department.
Senator TYSON. The immigration department?
Mr. STEWART. Yes, $ir; there is a good deal of discretion, left there.
An employment exchange system can do much to regularize casual
employment. That is something that has not been attacked yet in
Canada; but experiments in that direction have been effected abroad
with success, notably in longshore work, where employees, as on the
Liverpool docks, have casual jobs of a few hours or a day or t w o ;
but by putting an employment-exchange system on the docks, by
having all the demands for labor coming into one place, they can
rotate the workers, use a limited number, and give them fairly
steady employment, as against the old system of a large partially
employed group waiting between jobs.
That system obtains in so many employments in Canada and the
United States and obtains around our grain elevators, where the
carloads of wheat come in, and the men wait in groups to assist in
We can also effect what me might call a dovetailing of seasonal
employments through such a system. No one knows how many hundreds of thousands of men move from seasonal employment, such as
bush work in the wintertime to farming or construction work or railway maintenance in the summer, and back again to the bush in the
wintertime. There are some men who have a repertoire of jobs in
occupations of that kind.
The thing is done now in an unorganized way. These men do
move, and move great distances; but they move as rumor tells them to
move, as a private employment agent directs, or as some newspaper
report indicates that they are required. An organized system would
know at once the location of the demand and the extent of the demand and would advise the movement and control the movement
accordingly, especially if it had the cooperation of the railroads, such
as we have in Canada, and especially if it had a reduced transportation rate.
I would not claim that a national employment exchange can relieve
or ameliorate unemployment conditions resulting from great economic depressions. At best it deals with the chronic unemployment
that obtains at all times by reason of maladjustment between supply
and demand. Industry must have a reserve, because it has pressure



upon it to produce in irregular amounts; and when the demand
comes, labor must be had. The effect of an employment-exchange
system is to reduce that reserve to the smallest possible proportions.
I n effect, it is regularizing in the open labor market just as some of
the gentlemen who have testified say they are trying to regularize
and give steady work within their plants to a smaller number of
people. I t reduces the size of the reserve through efficient handling
of the demand and of the labor supply.
Even in depressions, if we are to take action of any kind in the
way of affording employment, such, for example, as is contemplated
in the Jones bill, some kind of prosperity reserve, the efficient execution of any such program involves a knowledge of the amount of
labor that needs to be absorbed, and the kind of labor that it is—if it
is construction labor, if it is railroad labor, or if it is purely unskilled
labor. Some kind of variegated program, suited to the kind of labor
unemployed, would be the most efficient; so that data as to the unemployed that remain unplaced, as recorded by an employment office^
and their occupations, are basic data for any such program.
When any program is adopted at such a time there must be a test.
For instance, if one were affording relief of any kind, there should
be some test as to whether the worker is genuinely unemployed, or
whether he is merely seeking relief. We found in Canada, in the
postwar depression and the period of demobilization, when the government did extend a money grant to returned soldiers who were
unemployed, that it was necessary to have some such test. I n the
English labor exchanges—where unemployment insurance, of course,
is a national institution—a man, although he has contributed to the
fund, can not receive insurance unless he has registered at the employment exchange and has not refused any suitable employment that
the exchange can offer.
Canada required for these returned men that they should be registered at the nearest employment office, and should get assistance
only when the exchange could not furnish employment suited to their
I t is, then, in that sense also a necessary agency in a time of
depression. I n other words, if the risk has been incurred, we must
find out about it; and this machinery tells us whether the unemployment risk has been incurred by the particular individual.
The CHAIRMAN. Have you any information as to the percentage
of unemployed that is made up of those men who desire to roam
and float around from job to job, and change from one to the other,
and who, in my opinion, should not be included in the aggregate of
unemployment ?
Mr. STEWART. N O , sir. I venture the opinion, however, that it is
a comparatively small percentage of the whole. The fact that unemployment coordinates with the activity of industry seems to me
to indicate that it is because industry is slack that these people are
unemployed; the fact that unemployment is greater in the winter
than in the summer. I should not expect people to be lazier, say,
in winter than in summer. I t seems to correlate with the activity
of industry and the activity of agriculture; and while no doubt
there is a proportion of unfit, of the loafer class, I think it is a
comparatively small element.



The CHAIRMAN. That is just your judgment? You have no statistics on the subject?
Mr. STEWART. Except that I would add that in the English experience, which of course may be very different—I think usually we
are supposed to be a bit more aggressive here in our working class
than in European countries—inquiries on that very point as to the
number of people who have tried to impose on the exchanges, to get
benefit without proper qualification, have revealed a surprisingly
small percentage. There have been general accusations in that direction, sir; but official investigations and independent investigations
have revealed very little.
The CHAIRMAN. Have you any information to verify or to show
those investigations?
Mr. STEWART. I could tell you what has been reported in that
direction, sir. I should be glad to do that.
The CHAIRMAN. I should like to have it, because I have an impression that there are many people who engage in all kinds of
industry, who from time to time get tired and weary, and quit and
go and look somewhere else to see if they can find a job they like
better; and I suspect that they are registered as unemployed because
they apply for jobs.
Mr. STEWART. A good employment exchange, of course, would
check up on its applicants.
The CHAIRMAN. If we had a national exchange, and there was a
system prevailing for registering the unemployed, would not they
be counted in in the unemployed if they came in and applied for a
job? Is not such a man unemployed?
Mr. STEWART. I would not call him unemployed. I do not think
a national employment exchange should call its applicants unemployed.
The CHAIRMAN. If he reports unemployed, that is all the information you have.
Mr. STEWART. I should ask him for the name of his last employer,
and I should like to check up on his experience in order to make a
decent placement; and unless he reported coming in from out of
town, or something of that sort, which made it hard—even there,
with a cooperative system, matters of this kind can be checked up.
Senator TYSON. H O W would you take care of a man who had no
employment? I t seems to me that a man who has not a job is
Mr. STEWART. But, as the Senator says, a number of these men
would be working at the time, and would apply at the exchange.
Senator TYSON. I see. Your idea is that if the man is employed
now, then of course he is not unemployed ?

STEWART. N O ; not



Senator TYSON. That is not what I understood the chairman to
The CHAIRMAN. N O ; that is not exactly the type I mean. For
instance, in a great industrial city like Detroit, with its probably
325,000 to 350,000 men employed, many thousands of thos^ men quit
one job and look for another, either because they hope to get a job
with higher pay, or a more congenial job, or they happen to be tired
of their old job; so they quit, and they go around to these employ



ment agencies and register for jobs. They are out of employment,
because they have quit their old jobs. They do not, however, represent the kind of unemployed that we are interested in.
Mr. STEWART. Not a bit.
The CHAIRMAN. I do not

understand that there is any system by
which they may be segregated from those who really are in need of
Mr. STEWART. Well, I will say that the lack of system that we now
have encourages unnecessary mobility of that sort; the fact that I
may quit a job in Detroit, and go to a private employment agent
who will ship me, without investigation of any sort, to a job in some
other industry at some other point because he gets a fee for it, and
at the same time will be glad to see a man quit to give this man a
place for the reason that he might get a fee for moving this other
man into his old job. I n other words, they thrive on movement of
labor. They can not thrive on a stabilized labor market; and that
gives to these workers of the class we are now speaking of a chance
to move. I t puts a premium on movement.
The CHAIRMAN. Not a premium on the mover, but a premium on
the agency.
Mr. STEWART. Or it stimulates movement; I will put it that way.
I n fact, it has a tendency to make the agent go into a gang of men
and hire them away. I t has been done.
Another function of employment exchanges is that of vocational
Senator TYSON. I t seems to me that any man who has not a job is
unemployed; it does not make any difference whether he is a good
man or a bad man; and the fact that he is a bad man means that he
is on the community in some way, and he either has to get employment or become a public charge.
Mr. STEWART. Quite so.
Senator TYSON. D O I understand you to say that your agencies do
not make any effort to get a man a job unless he is considered a good
man, or has some recommendation from his last job ?
Mr. STEWART. N O . We would try to place the applicant, good or
bad; but we would certainly try to refer the men that were most
qualified for the job to which we were referring them.
A man of the class that you are referring to is very apt to keep
away from an efficient employment agency. If he is seeking work,
he will come. If relief of any kind is being given, he will prefer to
get the relief rather than the work. But if the work is made conditional upon his being registered at the employment exchange and
accepting suitable employment, I think we are dealing in rather summary fashion with that type of man.
Senator TYSON. Your idea is that if a man is not willing to make
any effort, after you have done your part to get him a job, to comply
and go in and take that job, then you deny him relief?
Mr. STEWART. Quite so.
Senator TYSON. I S that the way it is done in Canada ?
Mr. STEWART. Since relief is not given on any kind of national
scale, no. I t is done in Great Britain; but I did indicate that in
the one experiment, of course, it did obtain for a few years after
the war with unemployed returned soldiers, if the man did not accept
suitable employment.



Senator TYSON. I see. That was only temporary?
Mr. STEWART. Quite so.
Senator TYSON. But in. Great Britain, as I understand it—are you
speaking now about what they call the dole ?
Mr. STEWART. Yes; what we prefer to call "unemployment insurance," because the man contributes to it.
Senator TYSON. Does the employee himself contribute to that dole
in any way?
Mr. STEWART. Oh, yes; quite so.
Senator TYSON. I n what way does he do that ?
Mr. STEWART. The employer deducts a contribution regularly from
his pay and puts a like contribution with that, and the Government
puts in an additional contribution.
The CHAIRMAN. There are three contributors.
Senator TYSON. That is what I wanted to get at—the employee,
the employer, and the Government, the three of them?
Mr. STEWART. Quite so.
Senator TYSON. And that makes up a fund ?



Senator TYSON. Can you tell me about how they regulate it in
proportion to what the man would get ordinarily when he is working
full time? They have to give him enough to live on, of course—
to barely exist, at least.
Mr. STEWART. That is the idea. I t is not enough to make him seek
to live on that rather than to accept employment.
Senator TYSON. Of course, I know it is very small. They want
to let him live, but at the same time make it so that he wants to get
a job and get out of it?
Mr. STEWART. T h a t is it. I t is slightly over $4 a week, generally.
Senator TYSON. D O they do that with every individual in Great
Britain, whether he wants to work or not ?
Mr. STEWART. I n the trades to which the act applies—and it covers
about 12,000,000 people; it does not cover agricultural workers and
railroad workers and some other fairly stable classes of workers—as
soon as the man is out of work he must report to the nearest employment exchange, and bring back with him his unemployment insurance book, which his employer has retained, and in which he has
marked his contributions week by week. I t shows his record; and
if he is qualified, has made the required number of contributions, and
has not exhausted his right to benefit by reason of previous unemployment in a year—the maximum amount of benefit that he can
have in a year is 26 weeks, I think—he is entitled, after a brief probationary period, to draw a benefit from the exchange; but if the exchange can offer him suitable employment in the meantime he must
accept it or his right to benefit is denied.
Senator TYSON. What do they do about people who can not qualify
under those conditions?
Mr. STEWART. The only thing that can be done there is to fall back
on charity, poor relief.
Senator TYSON. The community has to take care of him?



Senator TYSON. Then they do not take care of everybody in Great
Britain through this dole or this form of insurance ?
Mr. STEWART. N O ; not everybody.




Senator TYSON. I thought practically everybody had a chance
there to get a bare existence until he could get employment.
Mr. STEWART. I t is a very large percentage of them. As to
some men who were qualified, they might exhaust their right to
benefit and still have to fall back. After a man had drawn his
26 weeks' benefit for the year, then he could not draw any more;
he would have to go over to poor relief.
Senator TYSON. Then he would be absolutely on the community?
Mr. STEWART. Quite so.
Senator TYSON. D O you have any idea what number of people,
so far as reports are available, are in that condition now in England
and Great Britain?
Mr. STEWART. I would not like to say, sir.
Senator TYSON. Have you just an idea of it?
Mr. STEWART. N O ; I have no idea, offhand.
Senator TYSON. YOU have not seen any statistics except to the
effect of so many being unemployed, say two or three million?



Senator TYSON. Does that include all of these men who get the
Mr. STEWART. N O . The usual figures give the number who are
under the unemployment-insurance scheme who are unemployed.
Senator TYSON. Then there must be a great many more than that?
Mr. STEWART. I should not say a large number more, sir.
Senator TYSON. Certainly more, however?
Mr. STEWART. More.
Senator TYSON. There must be some more.
Mr. STEWART. There are more. There is no doubt about that.
Senator TYSON. I should think there would be, in times of depression, a very great number.
Mr. STEWART. Well, since most of the industries are under the
unemployment-insurance scheme, except agriculture—and their people really are not unemployed in England, where it is an all-yeararound contract, as a rule.
Senator TYSON. There must be a great many casuals, though, who
have not any regular employment; I mean to say, in ordinary business, because agriculture in England does not amount to so very
Mr. STEWART. N O ; but there is a considerable body of agricultural workers there.
Senator TYSON. Of course, I understand t h a t ; but agricultural
workers are generally employed.
Mr. STEWART. Quite so.
Senator TYSON. I t is the others that they have to consider.
Mr. STEWART. Yes; but even the longshore industry is under the
Senator TYSON. I could very well see how that would be; but
there wmild be many other things, like taxicab driving, or something like that, or a man who had a little bit of a business of his
own, and who would go broke, and have to get out of it.
Mr. STEWART. Small business men—quite so.
Senator TYSON. There must be thousands and thousands of them.
Mr. STEWART. The figures under the act now have been running
something over a million. Of late, it has been increasing a little.



I should say, just from memory, that there are probably 1,100,000
unemployed now; and then you might add 10 per cent or 20 per cent
above that figure for the classes you have indicated.
Senator TYSON. I see. Do you think that is the best form of insurance for unemployment that can be evolved? I mean to say, do
you approve of that? Do you think that is the best form that can
be had, so far as you know at this time?
Mr. STEWART. May I answer that by relating a little experience
here in this country with unemployment insurance ?
Senator TYSON. Certainly.
Mr. STEWART. After I left Canada I was employed with the
Amalgamated Clothing Workers, a trade-union in the men's clothing industry. We had, in Chicago, about 300 firms with 25,000
workers, a seasonal industry, these men moving about promiscuously
from plant to plant. We first organized a central employment exchange, so that instead of these men chasing about from shop to shop ?
and there being a group of them at the gate every morning when
the employment manager came into his office, they centered in the
one employment office, and all the demands for employment were
sent to that office, and the employees were dispatched as the demand
was indicated.
T h a t greatly cut down the reserve of labor required, because you
did not have a reserve around each of 300 shops, large and small;
but you had a pooling of all these reserves, and thereby, of course,
diminished the total.
After a year's organization of that sort in cooperation with the
employers the union set up a scheme of \unemployment insurance.
The employee contributed iy2 per cent of his pay, and the employer
a like amount. A trustee board, chosen by the two sides, was set
up, and the contributions of the firm and the employees were sent in
every pay-roll period by the firm to the trustee board, together with
what amounted to a copy of the pay roll, indicating each worker's
work done in hours, his wages, and how much was deducted, so that
it could be checked. I t also indicated, therefore, how much unemployment he had had during the week; and benefit was paid in proportion to the wages he received. I t was a percentage of wages. I t
is now, I think, about 35 per cent. I t was 40 per cent at the beginning; but because of a very great depression in the industry it had
to be reduced to 30 per cent. I think they have gotten back now a
That provided, in the first year, a fund of over a million dollars.
The workers, however, were required to be members and to contribute
for a year in order to establish a reserve before they were allowed
to begin to draw benefit. I n 1923 the scheme was adopted. I n
May, 1924, we began the payment of benefit.
The employment exchange, of course, was the necessary preliminary. They had to be registered there. If there was employment in any firm in the city for the unemployed worker, he was
sent to that job. The test which you were raising as to whether or
not they are genuinely unemployed was his desire to accept a job.
If he refused any suitable employment, of course, he was not entitled
to benefit. If, while he was drawing benefit, a suitable job could
be found for him, he was offered the job, and had to take it or be
struck off the list.



The highest amount of benefit paid in any year amounted to about
$100. That was all the fund would stand. Since that time the
same system has been extended, with some modifications, to Rochester, which is the third largest clothing center of the country,
and now to New York, which is the largest; and in Chicago the
fund has been increased by a larger contribution from the employers.
So that I should say now the fund will probably be a million and
a quarter a year; and that amounts to more than it seems, because
the number of workers in the industry has been very greatly reduced, I should say by perhaps 25 per cent, in the last four or five
The CHAIRMAN. That differs very little from the English system,
except that the Government does not contribute. Is that it ?
Mr. STEWART. The Government does not contribute.
The CHAIRMAN. I n other words, the system is almost the same
except for t h a t ; is it not ?
Mr. STEWART. Quite so; but it is a purely industrial thing. I n
England there are, in a few instances, schemes like that operated
entirely by employer and employee which are supplementary to the
Government's scheme. The Government's scheme is really a minimum provision, I should call it, and where workers and employers
desire to safeguard themselves to a greater degree against unemployment they organize a supplementary scheme.
As a matter of fact, the English act of 1920 did contemplate
schemes of this sort, and made provision even for an industry to
contract out of the general scheme and set up its own scheme, apart
from the Government. That was later countermanded, by reason of
the fact that in this serious depression the Government needed all
the good, regular industries to contribute. Obviously, the industries that were least subject to the hazard of unemployment were the
ones that would withdraw. I think about two industries withdrew
on that basis; and then the Government saw that it would lose
revenue for the whole scheme in that way, and countermanded the
right to contract out.
Senator TYSON. I have read that there was some abuse of this
thing, and that a good many preferred to get their dole rather than
to work. Have you any knowledge on that subject; or what is your
view about it ?
Mr. STEWART. I will just add something to what I said a moment
ago—that all the official investigations in that direction have brought
out very little abuse. I t is admitted, of course, that in, say, 1,100,000
unemployed, there are some impostors who will get away with the
thing they are trying to accomplish; but the Government committees
that have investigated this matter have not only examined records
and examined their^ own officials, but they have invited charitable
officials and any citizen who has any information on the fact, any
accusation to make in that direction, to come forward; and in every
instance the precipitate, the information, has been very small.
Senator TYSON. I n other words, you do not think there is any
very great amount of abuse?
Mr. STEWART. I do not think it is a serious abuse at all.
Senator W A L S H of Massachusetts. Have you any information as
to present unemployment conditions in this country ?



Mr. STEWART. NO, sir; not any more than any other citizen may
Senator WALSH of Massachusetts. Only last night the man in
my office who handles the mail said he had never seen so many
requests for employment and so many pathetic letters come into
the office in all the time he has been with me. In fact, he added
further, " Some of them bring tears to my eyes." I read some of
them myself, and I wondered if these letters reflected a wider extent
of unemployment than we generally appreciate.
Mr. STEWART. I am not in a situation, sir, to report on that.
Senator WALSH of Massachusetts. I find that a great many of
these letters are from people previously in rather substantial circumstances—not in industry, but heads of departments in stores,
insurance men, auditors, and semiprofessional men.
The CHAIRMAN. DO you mean that they are out of employment?
Senator WALSH of Massachusetts. Yes.
Mr. STEWART. Just to hazard a guess, the integration of industry,
the mergers that have been taking place, the efficiency that has been
accomplished in business, are eliminating men.
Senator WALSH of Massachusetts. They are eliminating a good
many of these men who received substantial salaries.
Mr. STEWART. Yes, sir. That is the place where we started off
again—that these men are being thrown on the market, and are
searching for employment, and there is no real organized national
effort to bring them in contact with the available opportunities.
The CHAIRMAN. Are there available opportunities?
Mr. STEWART. That is what we do not know.
The CHAIRMAN. I suspect that if that condition is general, there
are no available opportunities.
Mr. STEWART. But, if there are no available opportunities, then
at least we know the extent of the problem, and we have a factual
basis for some kind of policy.
One other function of employment exchanges is that of vocational
guidance. I will hurry over that.
We have this effort on the part of school authorities to direct
children and young people coming from the colleges into lines of
effort that are expanding. Just the other day I noticed that in
France they had found that there was a great tendency on the part
of young people to seek certain occupations regardless of whether
there was a demand in those occupations or not, and that they had
been successful in directing a very large proportion of them into
more fruitful lines, to leave off their inclination to some favored
occupation; and of course I noticed that in the bill that Representative Casey has introduced, on labor exchanges, provision is made
for a special effort for juvenile workers, a junior section. A national
system that would bring together the statistics of demand and the
statistics of supply by occupations, by industries, would give the
factual basis for a program of vocational guidance for young
Not only that, but in view of the thing we have just been saying
here there is need, I think, for a greater body of vocational information for adults. The new efficiency in industry, the new mechanization, the technological improvement in industry, means that industry
can get along with fewer workers. It means the reabsorption of



these displaced people in other lines. I n a great many cases it must
mean retraining.
A machine i,s developed that annihilates, all of a sudden, a given
operation or a given occupation for those auditors or insurance
agents that you have mentioned, or mechanical people.
The CHAIRMAN. What would you say with regard to vocational
training when it was stated here the other day that there are probably ten or twelve thousand musicians out of work because of the
movietone ? How could they be educated into some other activity ?
Mr. STEWART. The present situation is that they get into some
other activity without assistance. Studies have recently been made,
not yet published, of men who have been released in this way. I
know Mr. Lubin has data of that sort available; and we find those
men, as a rule, getting over into occupations that do not demand too
much training. They have to get into a salesman's job, some kind
of service occupation, running an automobile or a truck, become
taxi drivers, and so on. As a rule—I think I am right in thijs—they
adjust themselves, as quickly as they can, into some easily acquired
The retraining, I think, often is done at a money sacrifice, because
the job is so often an unskilled job. They may have more success
ats a salesman than as a mechanic; there is a possibility of greater
income; but in so many instances it indicates a general lowering
in their standard. That is all being done at these men's own expense
now. They are paying the price of progress in industrial technique.
Senator W A L S H of Massachusetts. Is not one of the troubles with
our vocational school that they do not take into consideration the
Mr. STEWART. I think it is quite so.
Senator W A L S H of Massachusetts. Have you observed the condition
in this country with reference to school-teaching ?
Mr. STEWART. I know what you mean, sir—the oversupply of
Senator WALSH of Massachusetts. Yes. I n my own State a large
number of young ladies who graduated from the normal schools two
years ago have been unable to get position^. I think it is stated
that only about a third of those graduated last year were able to be
placed; and I was inquiring, and I find that the same condition exists
all over the country. Am I correct?
Mr. STEWART. I think so, sir.
Senator W A L S H of Massachusetts. I t seems to me that a State
government that was alert to the question of supply and demand
would .seek some way of turning those normal schools, or some of
them, into some other vocation where there was a demand, and
encourage young ladies to take up some other occupation; but, so
far as I know, no effort of that kind has been made. Is not that
true more or less of a great many of these vocational schools ?
Mr. STEWART. Quite so. They have not had the data on which to
base a policy for the direction of people into expanding occupations.
I will close by saying what I have already indicated—that while
a system of this sort does give information for vocational guidance,
it also gives information to help in the formulation of an immigration policy, arid it furnishes a valuable statistical by-product for all



these matters; and, last of all, that it is something that requires
efficient administration, and must be regarded as a big business
proposition, that, if not well organized and efficiently managed in a
business way, is better not tackled at all.
The CHAIRMAN. Can you get that in a Federal bureau?
Mr. STEWART. I do not know, sir.
The CHAIRMAN. I thought you had had enough experience with
Federal Governments to answer that.
Mr. STEWART. I am still a Canadian.
The CHAIRMAN. D O you mean by that that being still a Canadian,
it is true in Canada ? Is that it ?
Mr. STEWART. N O . We have there this advantage, if I may call it
such—that our tenure in the civil service is fairly continuous; that
when we establish an employment office in the city of Toronto with,
say, 80 to 35 employees in it, those employees will be there as long
as they can perform their jobs efficiently and they please to remain.
They have developed a knowledge of their jobs, and I think are
steadily increasing in efficiency.
The CHAIRMAN. There are a great many people who believe that
the very opposite is true of civil-service employment. They believe
that when you once get certified in the civil service you can loaf on
the job as much as you like, and not get fired, because of the civilservice protection. That may sound humorous; but, at the same
time, there is a great body of Members of Congress who believe that
that is true of the civil service.
Mr. STEWART. There have been people dismissed, of course.
The CHAIRMAN. Oh, yes; they are dismissed, but they usually
cause so much row that often the chiefs have not courage enough to
dismiss them.
Senator W A L S H of Massachusetts. I t is largely due to lack of
proper supervision. If the supervisor is not industrious and efficient, the help about him will not be.
The CHAIRMAN. Yes; and then they are very frequently cowards
because they do not want to create a disturbance.
Senator W A L S H of Massachusetts. Are you familiar with the collection of statistics on unemployment by the Canadian Government ?
Mr. STEWART. Yes, sir.
Senator W A L S H of Massachusetts.

Do they collect statistics for
part-time employment as well as for full-time employment?
Senator W A L S H of

Massachusetts. That is not done by our Govern-

ment, either; is it ?

Senator WALSH of Massachusetts. Do you not think something
ought to be done to give to the country a proper picture of employment conditions, to gather statistics on part-time employment?
Mr. STEWART. I quite agree.
Senator WALSH of Massachusetts. I notice, for illustration, in a
report that came to me from the Massachusetts department that collects statistics, that the report showed an actual increase in employment in the month of November over the month of October, but a
decrease in pay roll; and when I came to examine farther down the
report, I found that the decrease in pay roll was due to the fact that
there had been a good deal of part-time employment.



Mr. STEWART. Quite so.
Senator W A L S H of Massachusetts. Would you not, from your experience, recommend the statistical department of our Government
including some system of obtaining the extent of part-time employment in our industries as well as the number of actual employees on
the pay rolls ?
Mr. STEWART. Yes, sir. I think there is an evolution in that direction among statistical people now.
Senator W A L S H of Massachusetts. I n other words, simple statistics of the number of people being carried as employees in an
industry can be very misleading as to the real condition of employment or as to the real condition of prosperity of that industry?
Mr. STEWART. Quite so. You see, we started out with just the
number of employed in the statistics. Then we began to develop
the pay rolls, because that was a corrective on the number of unemployed. I think I am quite right in saying that the objective now
is the man-hours worked in a pay period; and some agencies are
making considerable headway in building up statistics of that kind,
so that you know precisely the hours put in in the pay period by
adding up the hours of all the employees worked.
Senator TYSON. There has been a great deal of criticism of the
d'ole system in England. I should like to ask you what you think
of it. Was it a necessity ? W h a t would have happened if they had
not had it; and has it benefited the conditions rather than hurt them ?
Mr. STEWART. I think England had to have it, and there would
have been very serious difficulty without it; and I think that all
parties in England now accept it as a piece of national machinery
that will be maintained indefinitely.
Senator TYSON. I n other words, you consider it a national necessity in Great Britain?



Senator TYSON. I S that the general opinion of people with whom
you are brought in contact ?



Senator TYSON. I s that the general opinion of, you might say,
union labor in this country, so far as you know ?
Mr. STEWART. I do not think union labor in this country understands the system over there or has studied it very much, and I think
they are " from Missouri " about it.
Senator TYSON. I S that the opinion of the people, I might say, in
Canada ?
Mr. STEWART. I may say in answer to that, sir, that the'committee
on industrial and international relations of the Canadian House that
reported early this year made the statement that it felt that unemployment insurance was just a little bit ahead—that was not the
exact wording—it was something that must sooner or later be considered for Canada.
Senator TYSON. Even in Canada ?
Mr. STEWART. Even in Canada; and I might say that there the
labor movement is in favor of it, and is strongly urging it upon the
Senator TYSON. D O you think you have as much unemployment in
proportion to your population in Canada as we have in this country,
so far as your observation goes?



Mr. STEWART. I should think so, sir. The climatic conditions
Senator TYSON. D O you have more? I should think the seasons
would be harder on people.
Mr. STEWART. The seasonal difficulty is greater. That is one reason why the United States acts as a sponge for us, in a way.
Senator TYSON. A lot of your people come into the United States
to get employment when they are out of employment in Canada;
do they not ?
Mr. STEWART. Quite so.
If I might add just one remark, sir, in the Casey bill there is a
provision—perhaps I referred to this—for the allocation of the Federal grant to the States on the basis of population.
The CHAIRMAN. You spoke with reference to it in Canada.
Mr. STEWART. Yes—well, I would quarrel with that principle, in
view of the fact that the need in the different States for an employment service might not have any relation to the population of the
The CHAIRMAN. I think j^ou would have some difficulty in Congress on that subject, because of the administrative latitude.
Mr. STEWART. Other conditions might prevail.
My contact with this matter has convinced me that the ordinary unskilled
worker is almost unbelievably lacking in the ability to approach effectively
his problem of finding a job. In Pittsburgh, for instance, I found hundreds,
If not thousands, of job seekers milling around, hour after hour, and day after
day, from one factory gate to another, in the utmost of despair and with
frequent exclamations of bitterness against society in general and the Government in particular—yet all the time with other factories hardly a mile away
looking for workers! The whole thing struck me—and still strikes ine—
as causing a state of mind which, when possessed by thousands of unhappy,
bitter men, represents the most serious threat against organized society and
In addition, it is a crime that with the general public recognition/ of the evil
of unemployment, we continue to do nothing to build any tool by which the
number of these unhappy, jobless men becomes anything but a guess.
One reason for this appears to be that a great many employers do not use
either the private or the public employment exchange. The result is that most
workers are probably justified in believing that, for the present at least, there
is no substitute for their visiting every possible factory gate
It is easy to understand how a lot of manufacturers might not like to trust
the ordinary private exchange with the job of securing anything above the
level of the most unskilled workers. Usually such exchanges are equipped
to handle only the lowest-grade workers and therefore hurt the pride of
the better sort of skilled men who don't like to be handled like " wops."
As to the public exchanges, my understanding is that employers tend to
distrust these as too often under the control of local unions; or, if this is
not the case, under the control of political henchmen serving other purposes than the greatest possible good of both seeker for men and seeker for
My belief is, accordingly, that (1) any government is playing with fire as
long as' it does nothing to lessen the bitterness of men looking, not only
hopelessly but blindly, for work; that (2) there is great opportunity for
larger use by both the employers and the workers of labor exchanges of some
sort; that (3) proper regulation of private exchanges is very difiicult, though
perhaps not impossible; and that, finally, there is, in any case, great need
of public exchanges whose expense is met mainly by government but whose
activities are under the direction of boards comprising balanced representations



of the various interests involved—employer and employee, union and nonunion, men and women, private citizens and Government officials. Such n
group could doubtless be given the cooperation, also, of the town's organized
and federated agencies, such as, for instance, the Welfare League here in
Cleveland. Possibly, even, a certain amount of financial cooperation between
such a body and the Government might provide the means of helping both
the employers and the worker to feel that the vital interests of all concerned
would not fail to be observed.

I. International standards.—The first international labor conference at Washington in 1919 adopted a draft-labor treaty, outlining the essentials- of a system
of nationally coordinated employment exchanges. Article II of that draft treaty
reads as follows:
" Each member which ratifies this convention shall establish a system of free
public employment agencies under the control of a central authority. Committees
which shall include representatives of employers and of workers shall be
appointed to advise on matters concerning the carrying on of these agencies.
" Where both public and private free employment agencies exist, steps shall be
taken to coordinate the operations of such agencies on a national scale.
" The operations of the various national systems shall be coordinated by the
international labor office in agreement with the countries concerned."
In pursuance of that policy 23 countries at the present moment have adhered
by ratification. These include Austria, Bulgaria, Denmark, Estonia, Finland,
France, Germany, Great Britain, Greece, Hungary, India, Ireland, Italy, Japan,
Luxemburg, Norway, Poland, Rumania, Yugoslavia, South Africa, Spain,
Sweden, Switzerland, Netherlands (approved).
These countries have also passed the necessary legislation in application of
the convention, either prior to or subsequent to ratification. In addition, the
Netherlands has approved the ratification and is considering the necessary
applying legislation.
17. Existing legislation.—The status of legislation creating national systems
of employment agencies stands at the present moment as below. These include
the basic acts and some orders. Special decrees or laws for special occupational
groups not included.
Argentine Republic: Act of September 25, 1913.
Australia: New South Wales—Part 10 of act of 1912 on industrial arbitration, amended in 1916, 1918, 1919, and 1920. Queensland—Act of December 23,
1915. South Australia—Order in council of July 30, 1911.
Austria: Notification of December 24, 1917; act of March 24, 1920.
Belgium: Royal decree, February 19, 1924, January 19, 1925; gave legal basis
to system previously existing by regulations.
Bulgaria: Law of April 12, 1925, January 1, 1926; includes unemployment
Canada: Employment offices coordination act of 1918, amended in 19201 (10
and 11 Geo. V, c. 25).
Denmark: Act of December 22, 1921; act of March 4, 1924; act of July 1,
Estonia: August 1, 1917 (since 1919).
Finland: Order of November 2, 1917; act of March 27, 1926.
France: Act of March 14, 1904; decree of March 12, 1916; act of February
2, 1925.
Germany: Notifications of the federal council of June 14, 1916, December 9,
1918, May 5, 1920; act of July 16, 1927.
Great Britain: Labor exchanges act, 1909.
Greece: Act July 1, 1920; royal decree, September 22, 1922.
Hungary: Order of the Minister of Commerce of February 17, 1917.
Irish Free State: Labor exchanges act, 1909.
Italy: Legislative decrees of November 17, 1918 and October 19, 1919; royal
decrees, March 29, 1923, December 30, 1923, June 26, 1925; November 6, 1926,
September 26, 1927.
Japan: Act of April 8, 1921; order June 25, 1925.
Latvia: Administrative instructions of January 21, 1921.
Norway: Act of June 12, 1906; act of June 30, 1921; since 1896.
Netherlands: Order of September 19, 1916; royal decree of April 14, 1917.



Poland: Order of January 27, 1919; act of October 21, 1921; act of March
3, 1926, and numerous decrees.
Portugal: Decrees of July 27, 1912 and May 10, 1919.
Rumania: Act of September 22, 1921.
Russia: Decree of Labour Commissaria August 21, 1924.
Serb-Croat-Slovene Kingdom: Order December 10, 1927.
Spain: Royal order of September 29, 1920; act of July 13, 1922; royal legislative decree November 26, 1926; February 14, 1927.
Sweden: Decrees of June 30, 1916, and May 16, 1918.
Switzerland: Federal resolution of October 29, 1909; general principles laid
down for the working of employment exchanges, November 29, 1910; federal
resolution of October 29, 1919; act of November 11, 1924 (completely new).
Union of South Africa: Act of July 25, 1924.
Distribution of employment exchanges in 16 countries, ~by area and population,
of e m p l o y ment


Great Britain
Hungary . _
Serb-Croat-Slovene K i n g d o m
S o u t h Africa

„_ _



per office

area per


62, 348, 782
42,767, 530
8,368, 273
2, 649,775
6,053, 562

88, 745
148, 756
122, 282

470, 085
520, 658
1, 716, 760

13, 733






South Africa.— (a) The Union is divided for labor purposes into eight divisions with headquarters in the largest town in each under an inspector and
staff. At the headquarters, in each division, the employment: exchange operates
primarily for the town and further serves as a clearing house for the division
generally.. In rural areas subsidiary employment exchanges are established
under head postmasters! (some 256) who act as an intermediate clearing house
for all outlying centers having subordinate post offices and postal agencies under
their control. In headquarters (and a few other towns) adults and juveniles
are separately dealt with, juvenile affairs boards being set up under an act
administered by the department of labor. The boards cooperate closely with
apprenticeship committees; and both are under the same central control as the
labor exchanges.
The placing of aboriginal natives is dealt with as a free service under special
control of native commissioners of the native affairs department, or by licensed
recruiting officers, also as a free service. The functions of the committees
referred to in paragraph 1 of article 2 are fulfilled by the national advisory
council of labor, of which the minister of labor is the chairman and which is
representative not only of diverse interests but also of different parts of the
country, on whose behalf the members are competent to speak. The selection
of the members is made by the minister, who pays due regard to the requirements as to the adequate representation of important and well-marked interests
and who consults responsible organizations where necessary in making his
choice. It is the duty of the council to advise! the minister, inter alia, on questions of unemployment; and the operations of the employment exchanges come
under periodical review in that connection. The individual members or groups
of members resident in one center are regarded as acting in an advisory capacity



in respect of local unemployment in those centers. Members are from time to
time called upon to serve on special committees to consider specific unemployment problems; and in that connection important committees have been appointed to deal with urban and rural unemployment, the administration of
poor relief, employment on the alluvial diamond diggings, and employment by
public bodies. Voluntary local committees have also been established in some
of the smaller centers in conjunction with the post-office employment exchanges.
The appointment of these committees has usually followed a public meeting
held for the purpose by an officer of the department of labor, and the committees are selected to represent different employers' and workers' interests.
The postmaster, who is in control of the local exchange, acts as chairman.
The committees hold periodical meetings and consider the results of the operations of the local exchange, as well as any local problems of unemployment.
Central control is exercised by the department of labor.
(6) Provision for the establishment of private employment agencies is contained in section 20 of the industrial conciliation act, 1924. Under the act
an agency may not be conducted unless the proprietor is in possession of a certificate of registration which may be issued by the registrar of trade-unions
and employers' organizations who, in isisuing certificates, takes into consideration the need for the agency and the suitability of the applicant. A maximum
scale of fees has been fixed.
(c) As regards the application of the last paragraph of article 2 the Government reports that this is a question which touches the Union very remotely and
is bound up with immigration policy. No policy for the introduction of immigrants to South Africa is in force at the present time, and it is; difficult to see
what kind of coordination would be effective as between the system in force
in/the Union and systems in force in other countries. The physical fact of
distance presents1 an almost insuperable obstacle apart from any question of
policy. Should it be found desirable, however, by other countries to avail
themselves of the employment exchange system of the Union, the Government
would be prepared to consider any feasible means of rendering any coordination
Austria,— (a) The system of free public employment exchanges existing in
Austria does not rest upon any special legislative provisions, but has developed
in practice through the enforcement of the unemployment insurance scheme,
the free public employment exchange, acting as unemployment offices. The
chief provisions which regulate the working of these free public employment
exchanges (unemployment offices) are section 20 of the unemployment insurance act, the tenth and nineteenth orders issued under this act and the
ministerial orders of May 26, 1920, and July 12, 1921. Almost all the public
employment exchanges are controlled by joint administrative committees of
which employers and workers are members. There are no legal provisions
governing the selection of the members of these committees; as a rule they are
elected by the district industrial commissions from among candidates proposed by the employers' and workers' organizations.
(6) The existing private employment agencies are of little importance, and
there is no collaboration between the private and licensed employment agencies
and the public employment exchanges. Efforts are being made to limit as far
as possible the activities of private fee-charging employment agencies. Some
collaboration with private employment agencies which are of public utility
has been effected by requiring these private employment agencies to announce
their establishment to the competent district industrial commission and to
supply statistical reports at regular intervals. (Order of May 26, 1920.)
{o) The Austrian Government considers that it would be desirable to coordinate the working of the various national systems for finding employment,
but the organization of the employment exchanges does not yet appear sufficiently developed—even in countries which have for many years been active
in this respect—for the establishment of a common system to be considered.
Collaboration between the various existing employment exchange systems,
especially between countries which have a common frontier, seems desirable,
but is difficult to realize in practice. Owing more particularly to the obstacles
placed by many States in the way of those who wish to cross their frontiers,
and considering that the statistical and other data available concerning the
labor market are still very incomplete, it can scarcely be expected that such
coordination could be successfully arranged. The first condition necessary for
successful coordination would be to allow workers complete freedom in moving
from one country to another.



Bulgw-ia.—(a) The act of April 12, 1925, provides in section 1 that free employment exchange work is to be carried out by employment exchanges and
by employment and unemployment offices. Section 6 provides for the establish-^
ment of employment exchanges at Sofia and Philippopolis, and gives the minis-ter of commerce, industry, and labor the power on the recommendation of the
superior labor council to order the establishment of employment exchanges in
localities in which there are more than 3,000> persons in permament employment. In localities where there are no employment exchanges, it is provided in
section 8 that employment-exchange work shall be carried on by local employment and unemployment offices, of which the report states that 33 are to be
set up throughout the country. The employment-exchange service thus created
is directed and supervised in each department by the labor inspector, and
throughout the country by a special branch of the labor department of the
ministry of commerce, industry, and labor (sec. 15) ; the service began its
preliminary work on April 1, 1926, and its regular work on August 1, 1926. In
sections 11 and 13 provision is made for setting up courts arbitration and labor
councils in connection with each local employment office. The courts of arbitration are to be composed of a justice of the peace as chairman, together with onerepresentative each of the employers and workers; these courts decide all disputes*
relating to employment exchange work, etc. The labor councils are to consist of
the labor inspector as chairman, a certain number of representatives of public,
authorities, and three employers' and three workers' representatives nominated!
by their respective local organizations; the duties of these councils are to*
investigate the work which can be carried out in case of unemployment, and
also other measures for the prevention or reduction of unemployment, the
application of labor legislation and the improvement of labor conditions..
(&) As regards private employment offices it is provided in section 2 that
they shall be prohibited and existing offices shall be closed not later than*
six months after the passage of the law. The law further provides that in
every town of more than 5,000 inhabitants a communal employment exchange
must be set up. Towns of less than 5,000 inhabitants, as. well as large villages
and rural communes must also set up employment exchanges or appoint an
agent to deal with the finding of employment when this is thought necessary.
Under section 6 the communal or municipal counsil must appoint an equal number of employers' and workers' representatives as members of the board of
directors of the employment exchange. The representative organizations of
employers and workers, if such exist in the district, may previously nominate
their candidates for election. The council must also appoint an independent
The only private employment agencies in existence are those maintained!
by certain organizations and by certain special trades. These agencies, after
the employment agency inspectorate has reported, are authorized by the State
to exercise their functions for three years. This authorization may be renewed. As the activities of the few offices in existence is restricted to
certain defined classes of employment which are not usually served by the
public employment exchanges, the public exchanges are unaffected by them.
The remoteness of the country renders the finding of employment internationally of little importance at present. In accordance with the instruction
given by the Chamber of Deputies in 1926 the Government insures that
vacancies in the country are in the first place given to Finnish nationals.
Foreign workers are, as a rule, granted permission to work only when the
vacant place can not be filled by Finnish labor and when the grant of a permission to work seems to be to the general interest and not merely to the
interests of individuals.
France.— (a) The act of February 2, 1925, to amend section 85 of Book I of
the Code of Labor and Social Welfare with regard to employment exchanges
and departmental employment offices maintained the existing obligation imposed upon towns of less than 10,000 inhabitants to keep a register containing
offers of and application for employment and the obligation for towns of more
than 10,000 inhabitants to establish a municipal employment exchange, andi
added a further obligation upon the departments to set up departmental employment offices. The municipal employment exchanges are at the free disposal of
the public, and the duties of the departmental offices are defined as being " t o
organize and insure in every commune of their area the recruiting and placing,
free of charge, of workers in agriculture, industry, commerce, and the liberal
professions, as well as domestic servants and apprentices.'* The expenses of



setting up and administering municipal exchanges and departmental offices
must be borne by the towns and departments concerned, and, if a town of more
than 10,000 inhabitants fails to set up an exchange, it is provided that " the
prefect shall take measures ex officio for its establishment, after a formal order
has been given to the municipal council without effect." Municipal exchanges
and departmental offices may institute trade sections for certain trades; an
agricultural section must be set up in every departmental office. To every
municipal exchange and departmental office, and if necessary to trade sections,
is attached a managing committee composed of an equal number of wageearning or salaried employees and employers belonging as far as possible to the
trades which make most use of the exchange. Public administrative regulations prescribing the conditions to which in general the various offices, exchanges or trade sections must conform, especially as regards the constitution
of joint committees, measures to insure that the placing work of the offices is
carried on bona fide and free of charge, and that there is impartiality in case
of labor disputes, coordination between the various exchanges and offices, etc.,
were issued on March 9, 1926.
The report further states that departmental offices existed in all except five
departments before the passing of the act of February 2, 1925. Since the issue
of the regulations of March 9, 1926, instructions for the full application of the
law have been issued to the prefects of the departments concerned, and new
offices have been created and others are being reorganized. At present the
number of employment offices and exchanges is as follows: Seven regional offices, the operations of which extend over several departments and the duties
of which are to coordinate the activities of the various departmental and municipal offices; 90 departmental offices (one in each department except in twc
cases; 108 municipal exchanges.
(b) As regards the coordination of the operations of employment agencies of
different types, the report states that the police prefect, by order of July 10,
1920, prescribed that fee-charging agencies in the Seine department must forward to the police prefecture at the beginning of each month " a report on the
operations of the agency during the preceding month, showing the number of
applications for employment registered, the number of offers of employment
received, and the number of workers placed, together with a statement of the
kinds of employments sought, offered, and secured." The Minister of Labor has
drawn the attention of the prefects to this order and has requested them to
suggest that the mayors of towns in their departments, in which fee-charging
agencies exist, should take similar measures. The report further states that a
bill to amend sections 79, 81, 82, 83, 88, and 102 of Book I of the Code of
Labor and Social Welfare, concerning the finding of employment for workers,
was introduced in the Chamber of Deputies on July 12, 1927. This bill provides that " in each department, every fee-charging or free employment agency
shall be required to communicate weekly, under conditions to be determined
by the prefect, to the departmental public employment office, the figures of the
requests for, and offers of, employment and of the vacancies filled."
(o) The report states that the international labor office, as a center of information and research, will find useful information upon the supply of labor
in the Bulletin du marche du travail.
Germany.— (a) The public-employment services in Germany are the concern
of the Federal Employment and Unemployment Insurance Institute. The organization consists of a head office, State employment offices and employment
exchanges. The authorities of the Federal Institute are the administrative
committees of the employment exchanges and of the State employment offices and
the governing body and directors of the Federal Institute. The administrative
committees consist of the chairman of the exchanges and an equal number of
representatives of employers, workers, and public bodies, as assessors. The
governing body and directors of the institute consist of the president of the
institute acting as chairman and of an equal number of representatives of
employers, workers, and public bodies, as assessors. The employers' and workers' representatives on the administrative committees of the employment exchanges and of the State employment offices are appointed from nomination
lists drawn up by the employers' and workers' organizations. The employers'
representatives on the governing body of the institute are elected by the employers' group of the Provisional Economic Council of the Reich; the workers'
representatives are elected by the workers' group of the Provisional Economic
Council. The employers' and workers' representatives among the directors
of the institute are appointed by the Minister of Labor from special nomination lists drawn up by the groups concerned in the governing body.



(&) The finding of employment privately is carried on by employment
agencies which do not work for profit and are outside the institute; the finding
of employment privately is also done by professional agents, whose activities
are permitted up till December 31, 1930. These two forms of finding employment, under section 49 (1) and section 55 (3) of the act respecting employment exchanges and unemployment insurance, are placed under the control of
the institute, which also supervises their collaboration with the employment
exchanges and the state employment offices.
(o) The report states that a clearer definition of the word "coordination"
would be desirable. If the International Labor Office desires to arrange the
coordination of the employment-exchange systems in the various countries, the
German Government is prepared to take part so far as it is possible.
Great Britain.— (a) Free public employment agencies exist in pursuance of
the labor exchanges act of 1909. Divisional and national clearing systems
facilitate the work of finding places for the unemployed. In connection with
each exchange there is a body known as the local employment committee
appointed by the Minister of Labor and consisting in the main of representatives of employers and employed, who advise on matters concerning the carrying on of the exchanges.
(&) Coordination between the public employment agencies and the employment agencies of the trade unions which cooperate in the application of the
unemployment insurance acts (1920^-1926) is effected by arrangements made
under section 17 of the unemployment insurance act, 1920, whereby weekly
returns of unemployed members of the association are rendered, and the
public employment exchanges offer vacancies when trade unions can not find
employment for their members. The divisional and national clearing systems
place this coordination on a national scale. The number of associations with
which arrangements had been made was, at the time of the first annual
report, 235 with a membership of 3,779,000. The figures for the succeeding
years were: June 30, 1922, 142 associations, 1,655,000 members; June 30, 1923,
141 associations, 1,021,748 members; December 31, 1923, 142 associations,
1,007,140 members; December 31, 1924, 145 associations. 964,578 members;
December 31, 1925, 143 associations, 1,103,000 members; December 31, 1926,
154 associations, 1,150,400 members; December 31, 1927, 145 associations with
an approximate total membership of 1,042,540. Up to December 31, 1926, 135
local education authorities had approved schemes under section 6 of the unemployment insurance act, 1923, which permits such authorities to undertake
duties in connection with the administration of unemployment benefit claimed
by persons under 18 years of age under schemes approved by the board of
education and the Ministry of Labor jointly.
(c) The Government reports that the state of unemployment in Great Britain is such that the introduction of labor from other countries on any appreciable scale is not necessary. The permits required when alien labor is introduced into Great Britain, however, are issued by the Ministry of Labor after*
consultation with the Home Office. On the other hand, on account of the differences in language and social and domestic conditions, there is little emigration of British labor to other countries except to British dominions and the
United States of America. Close arrangements already exist for regulating
interimperial migration. The United States of America immigration legislation
does not provide for the transfer of labor from other continents through the
machinery of employment exchanges.
Greece.— {a) The royal decree of September 22, 1922, concerning the establishment of employment exchanges provided for two free public employment
exchanges, one at Athens and the other at Piraeus. It was further provided
that these exchanges should be supervised by a committee composed of a labor
inspector as president and one representative each of employers and workers,
and should be required to furnish monthly statistical information to the
labor directorate. In other parts of the country the duty of endeavoring to find
work for the unemployed fell to the labor inspectors. The report states that a
new legislative decree relating to employment exchanges and unemployment
insurance is now before the Chamber of Deputies, and that the employment exchanges set up under this decree will be administered by committees constituted in accordance with the intentions of the first paragraph of article 2 of
the convention.
(ft) The new legislative decree provides for the coordination on a national
scale of the operations of the exchanges set up under it and of private agencies.



(o) The Greek Government considers " t h a t the present conditions in the
various countries governing the entry, departure, residence, and work of emigrants only permit of a degree of coordination limited to the periodical communication by the International Labor Office to the countries concerned of
the number of unemployed belonging to classes of workers who could be employed in these countries."
India.—In view of the absence of industrial unemployment and of the fact
that the provisions of the provincial famine codes adequately meet the case ot*
agricultural unemployment, the Government decided, after consultation with
provincial governments, that the establishment of special agencies is at present unnecessary. In Madras, however, there is a labor and employment bureau
to secure employment for the members of the depressed classes and South
African repatriates.
Irish Free State.— (a) A system of free public employment exchanges exists
in pursuance of the labor exchanges act, 1909. Further, under the unemployment insurance acts, practically the whole of the employed population (with the
main exceptions of agriculture and private domestic service) is insured against
unemployment. Insured persons, when unemployed, must lodge their unemployment books (without which employment in an insured trade can not be
obtained) at an employment exchange, before they can be entitled to benefit in
respect of their unemployment. Employers notify opportunities of employment
to the exchange, the duty of which is to offer suitable employment to unemployed persons registered there. Benefit is paid only if such employment is not
available. The system of national employment exchanges is administered by the
central government through the Department of Industry and Commerce.
Local offices, of which there are about 100, are established in the cities and
principal towns of the country. Committees, which include representatives of
employers, workers, education authorities and other local bodies or interested
persons, have been appointed to advise on certain aspects of the work of
exchanges. A system is in operation by which vacancies that can not be filled
locally are circulated nationally from a central clearing house. This system
is known as the national clearing system.
(&) The chief public employment agencies, apart from the employment exchanges set up by the State under the labor exchanges act, are those of the
trade unions which work from district and branch offices. These offices keep
registers of unemployed members. By means of arrangements made with
associations under section 17 of the unemployment insurance act of 1920, coordination is effected between the employment exchanges and the trade-union
branches. If the trade union can not itself find employment for its members,
the employment exchange offers any suitable available vacancies to them. By
means of the national clearing system mentioned above co-ordination is on a
national scale.
(o) The report states that the Government w7ill be prepared to consider any
definite proposals put before it for the purpose of coordination by the International labour office of the various national systems of employment exchanges.
Italy.— (a) During the period under review the placing of unemployed workers has been directed by the Patronato Nazionale. This body, which was given
legal personality in 1925, acts as an autonomous institution of the confederation
of trade unions, with the agreement of the employers' organizations. During
1927, in addition to its other activities for the benefit of the workers in connection with labor and social welfare legislation, the Patronato has dealt satisfactorily with the finding of employment for workers under the control of the
Ministries of National Economy and of Corporations. The placing of unemployed was effected in each province through special offices, which were coordinated with communal offices, and which were assisted in their detailed
work by the regional authorities of the confederation of trade unions; the
provincial offices were divided into trade sections, corresponding to the kinds
of workers in the province. Each office has been supervised by committees
composed of an equal number of employers' and workers' representatives nominated by the industrial organizations concerned, the chairman being ordinarily
the director of the Istituto provinciale del Patronato. The offices have also
acted as offices for the distribution of unemployment benefit as provided by law,
and for the reception of the signatures of the workers in receipt of benefit.
(6) Private employment agencies had been prohibited in Italy under the
explicit prohibition contained in section 11 of the legislative decree No. 2214
of October 19, 1919. However, by the promulgation of the codified text of the
laws relating to the public safety in the royal decree No. 1848 of November 6,
1926, the possibility of carrying on private employment agencies has again been



permitted, provided that such agencies have received due authorization in the
form of a special license granted by the public safety authorities. Under the
same legislation, an obligation is imposed on such agencies to keep a daily
register of their operations and to keep permanently posted up in a conspicuous
place the list of fees which may be charged. Nevertheless, private employment
agencies have no practical importance in Italy, and it has not therefore been
considered necessary to take steps to coordinate their operations with those of
the public offices.
(c) The Italian Government is prepared to consider any suggestions which
may be made by the International Labor Office with a view to the coordination
as far as may be possible, of the operations of its employment exchange system
with the systems of other countries.
Japan,— (a) The act of April 8, 1921, provided for the establishment of free
employment exchanges by the authorities of cities, towns, and villages or, with
the permission of the director of the employment exchange board, by private
persons or bodies. The exchanges maintained by cities, towns, and villages are
subsidized by the State; they may be set up on the initiative of the local authorities or by direction of the Minister for Home Affairs. The exchanges thus
established numbered 210 on December 11, 1927, of which 38 were private.
From January to October, 1927, these exchanges received 2,975,970 applications
for work and 2,548,007 offers of work; 2,365,800 workers were placed, and
2,181,106 applications were satisfied.
The organization of employment exchange commissions is provided for in
the ordinance of February 20, 1924. In pursuance of this ordinance a central
employment exchange commission has been set up, followed by the appointment
of local commissions in Tokyo, Osaka, Fukuoka, and Nagoya. The functions
of these commissions are to 4
advise the administrative authorities on the work
of the employment exchanges by means of replies to inquiries or by representations. The chairman of the Central Employment Exchange Commission is the
director general of the Bureau of Social Affairs, whilst the chairman of the
local commissions are nominated by the cabinet on the recommendation of the
Minister for Home Affairs from among the members of the commissions. The
number of members of the central and local commissions may not exceed 20;
they are chosen, as regards the central commission by the cabinet on the
recommendation of the Minister for Home Affairs, as regards the local commissions directly by the minister; they include equal numbers of persons representing the interests of the employers and persons representing the interests
of the workers chosen, for the present, from amongst persons nominated by the
prefects. In addition, there may be set up, to express opinions on matters relating to the management of the local employment exchanges, employment exchange commissions in the cities, towns, and villages, the members of which
are to be appointed by the heads of the respective cities, towns, or villages.
The regular composition and the procedure of the local commissions are also
to be determined by the chief magistrates of the cities, towns, or villages, who
are required to report to the directors of the employment exchange boards.
The members of these commissions include an equal number of representatives
of both employers and workers. The method of their appointment is, for the
time being, left in the hands of the chief magistrates of the cities, towns, or
(6) In order to coordinate the operations of the public and private employment exchanges there have been created, subject to the supervision of the
Minister for Home Affairs, the central and local exchange boards, which include among their tasks the exchange of information. In order to facilitate
coordination between the public and private employment exchanges, the heads
of cities, towns, or villages and the directors of the local employment exchange
boards designate one of the exchanges within their respective jurisdiction to
coordinate the operations of all the exchanges. The total number of employment agencies charging fees or carried on for gain was 3,457 on October 31,
1927. Their operations included the receipt of 738,923 applications for work and
892,244 offers of work; 727,504 workers were placed, and 463,222 applications
were satisfied.
(c) The Japanese Government is of opinion that there is considerable difficulty in realizing the coordination of the operations of the various national
systems by the international labor office, in agreement with the countries concerned. However, it is hoped that steps may be taken to give effect thereto as
far as possible.




Norway.— (a) The public employment exchanges act of June 12, 1906, established employment exchanges in communes, each under the control of a committee appointed by the commune and composed of a chairman and an equal
number of representatives of employers and workers, who may be nominated
by the employers' and workers' organizations. State supervision is carried out
by the Ministry of Social Affairs, through the inspector of public employment
exchanges. No fees are charged. There are at present 48 employment exchanges. Norway is divided into five employment areas for the transference
of labor from one region to another. The local employment exchanges send to
the central exchanges of the areas weekly reports showing the requests for and
offers of employment with which they can not deal. On the basis of these
reports the central exchanges draw up lists for the whole of the area, which
are sent to railway stations, etc., to be posted up. The exchanges are also
authorized to issue half-fare tickets to the place of work to the destitute
(b) The free private employment exchanges in Norway have become of so
little importance that it would not be worth while to coordinate their activities with those of the public exchanges. The free private exchanges which
hold a concession are required, under the act of June 12, 1906, to send reports
to the central statistical office.
(c) The report states that "collaboration with other countries in the finding
of employment has always been practiced when an opportunity occurred. Now
that the migration of labor is regulated and restricted by the legislation of
various countries, the free exchange of labor between different countries is no
longer very considerable. It could clearly be desirable to coordinate the system
of finding employment in different countries, both as regards procedure
and also as regards statistics. A special drawback is that it is difficult to
compare the statistics of employment found and of unemployment in different
countries." The report concludes that in this respect the Inter national
Labor Office has a task which it has not yet carried out.
Poland.—A system of free public employment exchanges exists in virtue
of the laws and orders referred to above under I. This system included, on
January 1, 1928, 38 offices in the principal towns, 18 branch offices in places
of lesser economic importance and 10 communal exchanges in upper Silesia.
During 1927, the public employment exchanges placed 293,935 workers, as
against 324,110 in 1926, and 282,111 in 1925. Mixed advisory committees including equal numbers of representatives of employers and workers have been
set up in virtue of the decree of January 27, 1919, relating to the organization
of employment exchanges, and of the order of December 18, 1923, relating
to the organization and powers of the joint advisory committees attached to
employment exchanges. These representatives are appointed by the municipal
and district councils or equivalent bodies, from candidates nominated by the
industrial organizations, or, in default of such candidates, directly from the
employers and workers, taking into account the economic importance of the
occupations concerned. The committees advise on all matters relating to the
working of the employment exchanges. In Posnania and Pomerania the
working of these committees is governed by an order of September 30, 1924.
(b) In addition to the public employment exchanges, there exist employment
agencies carried on by social organizations in accordance with the act of
June 10, 1924, and commercial employment agencies regulated by the act of
October 21, 1921. The employment agencies carried on by social organizations
are not to derive any financial profit from their activities, but to cover expenses
they may charge employers a fee equal to 5 per cent of the first months'
earnings of the person placed. In 1927 there were 158 such agencies, and
the workers placed in 1926 numbered approximately 25,000. These agencies
are supervised by the public exchanges, to which they must report monthly.
As regards the employment agencies carried on by way of trade, section 4 of
the act of October 21, 1921, provides that a permit to carry on an employment
agency shall not be granted " if a sufficient number of employment agencies
already exists in the locality in question, and especially if a State or other
gratuitous employment exchange is in existence there and carries on its
work satisfactorily." These permits may only be granted to persons who
were already carrying on agencies when the act came into operation; they
may be granted for one year by the minister of labor and social welfare,
who specifies the occupations and localities to which the permit applies. The
number of fee-charging agencies was 56 in 1927 as against 59 in 1926; they
placed approximately 17,000 workers. The act of March 3, 1926, amending



section 5 of the act of October 21, 1921, extended the period of five years from
the promulgation of the act, within which registry offices for domestic servants
were to be abolished, to eight years.
(c) The Polish Government states that it attaches importance to the coordination provided for in the third paragraph of this article of the convention,
and would like the International Labor Office to make proposals, after consulting
the governments concerned, with a view to the exchange of national statistics
by emigration and immigration countries and the adoption of uniform methods
of placing workers.
Rumania.— (a) In application of the employment exchanges act of September
22, 1921, circuit employment exchanges have been established in the towns
of chief commercial and industrial importance. During 1927 there were 37
such exchanges. There are also registration offices in all urban and rural
communes which receive applications for employment or for labor which are
communicated to the circuit employment exchanges. No fees are charged for
finding employment. The sums necessary for the working of the exchanges
are provided for in the general budget, upon proposals made by joint
committees, regional and central (appointed by the Minister of Labor), and
confirmed by the directorate of the employment exchange service. Joint
committees of an equal number of workers and of employers are attached to
each exchange and make proposals as regards the work of the exchanges and
the budget of the exchange. These committees are under the control of the
directorate of the employment exchange service. The Government intends to
increase the number of circuit exchanges as the nedd arises. When the circuit
exchanges are sufficiently numerous the regional exchanges provided for in
the act will be set up; meanwhile, the circuit exchanges in localities where
there are factory inspection offices act as regional exchanges. The activities of
the circuit exchanges and the communal registration offices are coordinated by
the central employment exchange directed by the directorate of the employment exchange service in the Ministry of Labor. During 1927 the exchanges
received 115,716 applications for work and 111,459 offers of employment; 80,302
workers were placed.
(6) Fee-charging agencies have been suppressed. Provision is made in
sections 7 and 8 of the act for licensing and coordinating the activities of free
private employment agencies, but, although a few trade-unions have received
licenses, no such agencies have been established.
(o) The report does not refer to the question of international coordination.
Spain.— (a) The royal decree of September 29, 1920, provided for the institution of a general employment service and a service of unemployment statistics
under the control of the Ministry of Labor. The results of this system had,
however, not been very extensive, according to the report for 1925, and the
report for 1926 stated that further provisions relating to the finding of
employment had been included in the royal legislative decree of November 26,
1926, establishing a national corporative organization. This decree provided
for the creation, for specified groups of trades or occupations, of joint local and
interlocal committees, one of the functions of which was defined in section 17
(4) as follows: "To organize labor exchanges, in order to find at any time
employment for unemployed workers, and for this purpose they shall make
an occupational census of the employers and workers in their branch in the
locality." The report for 1927 refers to previous reports.
(6) The report does not refer to this question.
(c) The report states that the Spanish Government considers that it is
possible to apply the last paragraph of article 2 of the convention.
Sweden.— (a) Employment exchanges established by the general councils of
the provinces and by some communes have been in existence since 1902 and
uniformity in the system has been attained by impos'ng certain conditions which
must be fulfilled before support may be granted from State funds. These conditions are laid down by the decree of June 30, 1916, amended by the decree of
May 16, 1918, concerning State grants for the organization and development of
the public system of exchanges. At the end of 1927 there were working 36
public employment exchanges controlling 36 employment offices and 106 branch
offices, 7 of which were engaged in finding employment for certain special
trades. Employment agents are also established in some localities. The direct
management of the work of the various public employment exchanges devolves
on special committees among whose members are an equal number of representatives of employees and workers. These committees are appointed by the
provincial or communal authorities which have established the exchanges;



the employers' and workers' organizations nominate their candidates previously.
During 1927 there were 517,711 applications for work; the number of vacancies
was 261,539, of which 211,977 were filled.
(&) The report states that as the private employment agencies are considered
as bound to disappear, no steps have been taken to coordinate their activities
with those of the public employment exchanges.
(c) As regards the possibility of coordinating internationally the various
national employment systems, the report states that the question does not at
present seem of practical interest, at least for Sweden. So long as there is no*
radical change in the dearth of employment and in the restrictive immigration
legislation in many countries, an increase in the exchange of labor between
States can not be hoped for.
Switzerland.— (a) Free public employment agencies had been established by
the federal decree of October 29, 1909, in the form of labor offices centrally
grouped in the " Association of Swiss Labor Offices "; this system was developed
by the resolution of the Federal Council of October 29, 1919, concerning unemployment benefit, which provided in section 5 for the creation in each canton of
a central employment office. In 1924 the system was somewhat modified by the
withdrawal on July 1, 1924, of the decree of October 29, 1919, and the issue by
the Federal Council of the order of November 11, 1924, respecting public employment exchanges, the object of which is to coordinate the obligations arising
from the convention for the confederation and the cantons. This order requires
the cantons to set up central employment exchanges. When, however, the
circumstances justify it, and if the Federal Department of Public Economy
agrees, several cantons may set up a joint central exchange. In accordance
with this requirement there is a central employment exchange (cantonal office)
in every canton. Those cantons, moreover, in which a central employment
exchange is insufficient have set up employment exchanges in the communes.,
or, where it was thought desirable, district exchanges covering several communes. The work of the communal or district exchanges is coordinated by thecantonal offices, that of the cantonal offices by the Federal Labor Office which,
publishes a daily bulletin containing the offers of and requests for employment
received from the cantons. The order of November 11, 1924, further requires
the formation of committees, composed of equal numbers of employers' and
workers' representatives, to serve as advisory bodies in questions concerning
employment exchanges. Within these limits the cantons and communes are
left free to choose the method of selecting the employers' and workers' representatives, the manner of appointing, and the exact task of these committees.
The requirement that these committees must be set up has up to the present
been interpreted to mean that the contons need not set them up if special circumstances make them superfluous. If, for example, the communal employment exchanges in a canton have joint committees, it may not be necessary to*
require the central office to appoint a committee. On the other hand, when the
central office of the canton has a joint committee it may be useless to require
the communal offices to appoint them as well. In practice, out of 34 public
employment exchanges in Switzerland, consisting of 20 cantonal offices and 14
communal offices, 24 have at present joint committees. These joint committees
do not all perform the same tasks. While some are bodies for the supervision
of the employment exchange, others are of a purely advisory nature.
(&) The order of November 11, 1924, lays down that the Federal Department
of Public Economy shall take the necessary steps to coordinate the activities of
free public and private employment exchanges. Some employers' or workers'
organizations collaborate in the monthly statement upon the situation of the
Swiss labor market. In addition, the daily bulletin prepared by the Federal
Labor Office is communicated, whenever it contains information likely to interest
them, to all the employers' or workers' organizations which have retained a
service for the finding of employment.
(c) Every three months the Federal Labor Office communicates to the International Labor Office a list, by occupations, of Swiss workers prepared to emigrate to take work abroad. The report adds that "the coordination of the
various national employment, systems would be a very difficult task. It might
even be asked whether it was worth undertaking so long as many countries place
restrictions on immigration."

(Thereupon the committee went into executive session, after which
it adjourned.)


Washington, D. C.
The committee met, pursuant to adjournment, at 10.30 o'clock a. m.?
in room 212, Senate Office Building, Senator James Couzens presiding.
Present: Senator Couzens (chairman).
Present also: Dr. Isador Lubin, special assistant to the committee.
The CHAIRMAN. Mr. Stewart, you came down here at the suggestion of Secretary of Labor Davis ?
The CHAIRMAN. YOU have read Senate Eesolution 219.
Mr. STEWART. Yes. I have not read it recently, but I think

I know
what it contains.
The CHAIRMAN. We would like to have you give us such information as you can with respect to the subjects which are particularly
pertinent to your department, such as the extension of systems of
public employment agencies, and so forth.
Mr. STEWART. On the subject of public employment agencies, Mr.
Jones, of the Public Employment Service, is here, and probably will
tell you more about that than I can as to what we have and what they
could do if they had the means to do it.
I n the nature of things there can be no statistics of unemployment
without a census. If the census were taken so that we had the number of unemployed at any given time, then the Bureau of Labor
Statistics, with its volume of employment, could apply that index at
a given time and show the number of unemployed. I n the first
place, you will have to define what you mean by unemployed. The
bureau's definition of that term as given in the reply to the Senate
resolution in 1926 is definite. Let me explain what I mean. I n
J a n u a r y , 1928, when the employment index in manufacturing industries was 84.2 per cent, computed on the average employment in the
same factories in 1923, equaling 100, the shrinkage in employment—
and understand I say shrinkage in emplo}^ment as against the average of 1925—was stated to be about 1,874,000. The index for November, 1928, was 87.4, or 4.2 per cent higher than in January, 1928.
That is to say, we are starting out this year with a take-up in the
old industries; and when I say the old industries I mean the indus-




tries that are covered by the bureau, of 4.2 per cent, which mean?
that the shrinkage has been reduced approximately by 79,000 persons,.
Now, the only way that I could get at unemployment would be tc
have a complete census of the unemployed taken as of some one date.
Sweden took a national census of the unemployed. She found 2.2
per cent of her population unemployed.
Suppose we had a census
which showed unemployment here as of January, 1929, at 2.2 per
cent, my index of employment being 87.7 per cent, or an unemployment of 2.2 per cent. That 2.2 per cent, of course, would be worked
out to actual numbers, and employment worked out to actual numbers, and then it is possible to say that with an employment index oi
87.7 per cent, and an unemployment of 2.2 per cent, if the employment index goes up, it would mean that the unemployment number,
went down, because then we would have an actual number to apply.
Iii the absence of such information as that it was necessary for me to
take 1925 as a base line with the statement that there was practically
no unemployment in 1925. Frankly I don't know whether there was
or not.
The CHAIRMAN. YOU started awhile ago to tell us your definition
of unemployment.
Mr. STEWART. By unemployment I mean a person usually employed, at present out of work, and seeking a job. That includes the
industrially unemployed. I t cuts out all of the unemployable—the
people who are too old to work or unable to hold a job for any reason.
I n other words, it cuts out the people who really belong to the social
question of outdoor relief, for which industry as such is only indirectly responsible and not immediately responsible at that time.
Whatever the indirect influences may be, that is entirely a sociological question and not one that the statistics can readly handle.
But, as it now stands, I am able only to state the volume of employment, and we began that in 1915. I n 1923 we radically increased the
percentage of establishments in our index and we made that year our
base line. I n July, 1928, as the result of the Wagner resolution, and
an increase in appropriation, we have extended that very materially.
I have a statement here of the extensions and of what it shows up to
The United States Bureau of Labor Statistics began the work of
collecting volume of employment and pay-roll data in 1915, and
carried it along as best it could until 1923, when a more vigorous
effort was made to widen its scope and materially increase the number
of reports secured.
I t s efforts, however, were confined solely to manufacturing industries. This was true up to J u l y 1, 1928, when, as the result of the
rather wild discussion of unemployment and the bureau's reply that
the only answer which could be given would necessarily be based
upon the change in the volume of employment, and that as shown by
the sample of manufacturing industries which it carried, together
with the volume of railroad-employment records carried by the Interstate Commerce Commission, Congress materially increased the
bureau's appropriation with the understanding that this particular
line of work should be expanded as rapidly as possible.
I n June, 1928, we were carrying reports from 11,231 establishments
in 54 of the prinicpal manufacturing industries of the United States.
These establishments in June had 3,091,921 employees with combined


earnings in one week of $83,523,193. Beginning with July, 1928,
the bureau began the collection of employment data in lines of industry other than manufacturing. I t also took steps to increase the
number of reports from manufacturing establishments.
Right here I want to say, in reply to some of the criticisms of this
employment index for the manufacturing group, that it is not confined to the old lines of manufacturing. While it is true that we
have not as yet developed a separate index for the manufacture of
radios and refrigerating equipment, such as Frididaire, j^et as a
matter of fact we are getting a very considerable percentage of the
volume of labor employed in these industries through the old-line
establishments themselves. For instance, reports from the Westinghouse Electric and General Electric Cos. include their employees
engaged in the manufacture of radio parts, electric refrigerating
equipment, small motors, and all of those things which are included
in the new lines of industry.
From our textile establishments we get reports which include the
manufacture of rayon textiles, and so on down the long list which
it is needless here to enumerate.
The volume of employment report for November, 1928, shows
11,954 manufacturing establishments reporting. This is an increase
of 723 establishments over the June report. I t covers 3,273,766 employees and a total weekly pay roll of $87,870,491. The percentage
of change in employment as between November and October, 1928,.
was a decrease of one-half of 1 per cent, while the percentage oi
change in volume of pay roll was a decrease of 2.8 per cent, which
indicates principally a decrease in working time.
I n August we added both wholesale and retail trade. The method
was to take the directory of wholesale establishments and write to
a selected list urging that they report to the bureau on employment
and pay roll. I n the November report we were able to carry 1,064
wholesale establishments employing 35,362 people. I n a similar way
with the retail trade we consulted the directories and the classifiedbusiness telephone directories and made similar requests upon them.
To a certain extent the agents in the field on other work were used
to make contacts with the retail dealers. I n the November report
we had 1,663 retail establishments reporting 144,772 employees, with
a combined weekly pay roll of $3,423,883. I t will be noted that the
percentage of change in retail establishments as between November
and October shows an increase of 5.8 per cent in the number of
employees with an increase of only 4.1 per cent in volume of pay
Public utilities appeared for the first time in the September report, comparison being between August and September. I n this
classification we include electric railway and bus lines, electric power
and light, gas, water, telephone, and telegraph companies. Here,
also, the reporting units were selected from the directories; and the
November report shows returns from 5,259 establishments employing
471,084 workers, with a combined weekly pay roll of $13,886,101.
Anthracite and bituminous coal mining appeared for the first
time in October, comparison being between September and October.
The November report shows 57 anthracite coal mining establishments
with 39,321 employees. The weekly pay roll for these 57 companies
was $1,247,513. Here the percentage of change as between November



and October was an increase of 1.4 per cent in the number of employees and a decrease of 6.2 per cent in volume of pay roll. Bituminous-coal companies reporting for November numbered 566, with
118,998 employees and a combined weekly pay roll of $3,145,959,
showing an increase in employment between November and October
of 4.8 per cent and an increase of pay roll of 3.3 per cent, which, of
course, is largely due to resumption of work after the strike.
I n the November report appears for the first time information for
metalliferous mining, comparison being as between November and
October. I n this report we carry for November 133 establishments
employing 30,316 persons with a combined weekly pay roll of
$911,603. The November report shows an increase of 1.3 per cent
in employees over October and an increase of 0.9 per cent in volume
of pay roll.
Information for hotels is also carried for the first time in the
November report, with 315 establishments reporting 55,201 employees
and a combined weekly pay roll of $957,099, representing cash payments only. As between November and October there was a decrease
of 1.1 per cent in number of employees and also a decrease of 1.1 per
cent in volume of pay roll.
Each of these new lines of employment information will be further
developed and expanded from month to month. The total number
of all establishments reporting for November was 21,001 with 4,168,820 employees and a combined weekly pay roll of $112,466,366. Admittedly it will be several months before we can tell the real significance of any of these newer groups.
The CHAIRMAN. YOU refer to the out-of-work people who are a
sociological problem rather than an industrial problem.

you at any time attempted to get at that
volume ?
Mr. STEWART. NO ; nothing but a census could do that.
The CHAIRMAN. That would require a national census, the same as
*our reapportionment census?
Mr. STEWART. I t would require a question on the census. I t
would require probably two questions as to whether there was anyb o d y above a certain age and below a certain age in a particular
family out of work on the elate of the census, and the age and the
sex and the occupation of such person out of work, and whether they
were actually seeking work at that time. That will eliminate those
who are unemployable.
The CHAIRMAN. Would you get at the number of unemployable
t h r o u g h such a method?
Mr. STEWART. Yes. Well, the number of unemployable would
probably require another question, but after all, that is as I said
^before a sociological question and not an industrial question. The
industries can not absorb the unemployable.
The CHAIRMAN. Is it of any value to society to obtain that number ?
Mr. STEWART. Yes; I should say that it is of great value.
The CHAIRMAN. What would we do with the information when
wre got it?
Mr. STEWART. All those people have to be taken care of. We are
•not letting people die in this country, at least directly, to any great
number; and something must be done to provide for them.



The CHAIRMAN. I S that a State problem or a National problem £
Mr. STEWART. Both. Unemployment insurance is taking care of
it in a limited way in 18 countries of Europe, and in Australia and
in New Zealand—no; unemployment insurance does not take care of
the unemployable; that takes care of the unemployed. So far as the
social side of it is concerned, it seems to me, while sociology is not
my field, I would want some of the symptoms before I undertook
to diagnose the case. I would not want a doctor to treat me who did
not even ask me what the symptoms were or try to see whether I
had a fever or not. We do not know anj^thing about our social
conditions, in other words, without just such a census as I am talking
about. For instance, half a mile from Fifth Avenue is Avenue A in
New York City. I n Avenue A 3^011 find 5,000 people per square mile.
I t is more densely settled than an equal space anywhere in the world,
not excepting India, China^ or anywhere else. The people aresleeping four or five in a room. Of course, if we do not care anything about Avenue A, well and good.
The CHAIRMAN. J u s t for information, is it your idea that it is
the concern of the Federal Government in respect to conditions in
Avenue A, or is it the concern of the State of New York?
Mr. STEWART. Senator Couzens, is it any of the Federal Government's business whether a State whose function it is to provide education for the people provides it or not ?
Is it any of the Federal Government's business that one State
should have 65 to 75 per cent of illiteracy and another State have
3 or 4 per cent? I don't know how far you carry the question of the
indifference of the whole to the condition of a p a r t ; but, after all, a
cancer on your lip might be the business of only the lip, but you,
better look after it yourself, or it will get you sooner or later.
The CHAIRMAN. That is the point, whether the State should look
after it or the Federal Government should come in.
Mr. STEWART. Can the Federal Government afford to see New
York swayed or swamped by Avenue A ?
The CHAIRMAN. Of course, you can carry that to any length you
like. The question is where the responsibility lies. I t is obvious
that everybody is interested in the welfare of his neighbors, but
there is a difference in being interested in the welfare of your neighbors and taking some particular step in that direction. I n other
words, we might wish our neighbor well, but the neighbor would
probably resent our tell him how to be well.
Mr. STEWART. I can hardly conceive of any State resenting a count
and census which would show the condition in that State as compared with other States. I n fact, that is a Federal question because
you can not make the States take a census. The taking of a census
ha,s always been a function of the Federal Government.
The CHAIRMAN. With that I take no exception. What I ask is,
What would we do with the information when we have it?
Mr. STEWART. We would know what to do with the situation
precisely as a physician would use the information he obtained intaking your temperature, your pulse count, and so on. He would at
least know what his problem was.
The CHAIRMAN. After he got his problem, he would have to have
the consent of the patient to act, would he not ?



Mr, STEWART. Yes; bnt presumably he had the consent of the
patient when they sent for him.
The CHAIRMAN. Not necessarily. A physician might order an
operation and the patient decline to have it done.
Mr. STEWART. That is true.
The CHAIRMAN. However, what I am trying to emphasize is that
there is such a conglomeration of information secured by the Federal
Government in particular, which is never used after it is obtained.
Great expense and trouble are involved to secure it. After it is
secured nobody knows what to do with it, and nothing is ever done
with it.
Mr. STEWART. I S that the fault of the information ?
The CHAIRMAN. I t is sometimes the fault of the absurdity in getting the information, when you know in advance that you are not
going to be able to avail yourself of it either because of constitutional
or temperamental reasons. The result is the same. I am not taking
any position. I am trying to find out what we would do with it when
we got it. We are a little off the track, so far as that part of it is
concerned. I recognize that the sociological question with respect
to the unemployed is a much larger factor than generally is admitted
in pretss stories. When we lump the number of unemployed, there is
no accurate designation between the unemployable and the employable. They are both problems. I n my judgment they are both
problems of the State particularly. Whether the Federal Government can do amrthing in a legislative way is a doubtful question.
Whether they should is a question of policy and also a doubtful
question. I am trying to get enlightenment from those of you who
are engaged on this one job all of the time.
Mr. STEWART. The question of unemployment is not exclusively a
State question, because the question of unemployment i,s a question
not only of production but of purchasing power. I t affects commerce, which is not a State question, which is not bounded by State
lines. I t may be quite possible that Michigan is not doing anything
in the case of the question of copper refineries. I n November, 1927,
I published a statement that the output of refined copper in pounds
p e r man per day had jumped from 610 to 1,612. I got a Jetter from a
company dated December 28, 1928, showing that it had jumped again
to 2,105. I n other wordts, we have the three periods, 610,1,612, 2,105,
with the consequent shrinkage in employment.
The CHAIRMAN. I S that from one company or all companies?
Mr. STEWART. One company, which means a reduction of men from
about 800 down to less than 200. I t is possible that Michigan is not
doing anything about that and does not intend to do anything about
that, but the fact remains that unless those men have been absorbed in
some other industries Michigan and the people of the United States
have lost the purchasing powder of about five-sevenths of the employees of that company. The only way that you can get at this
is from a census of those working and those unemployed, because
at the same time that they reduced their employees from 800 to
less than 200 they jumped their product from 9,000,000 to 15,318,000
pounds per month, and they sell it. That shows that business is
good. They are selling a third more copper than they did when
they employed their 800 men. You can not get the conditions of
labor from the volume of sales, and unless these men are reemployed



somewhere it is going to affect not only Michigan but the United
The CHAIRMAN. There is no question but that what affects one
State affects the Nation. I am not arguing your point; I am asking
the question of w7here the responsibility of solving the problem is.
Mr. STEWART. I think it was Abraham Lincoln who said that if
his wife fell overboard from a ship he would not wait to look up
the marriage certificate before he jumped in and tried to save her. I
think that so long as a strict construction is not applied where it
is not convenient, the strict construction of the Constitution ought
to be as pliable in cases of social cancer as it is in other cases.
The CHAIRMAN. Of course, you can make those fine paraphrases
and quotations from Mr. Lincoln, but it is perfectly obvious if the
Federal Government is going to assume all the responsibility of
the States every time something needs to be done, there is no necessity for a State taking any action at all. W h y not pass it all on to
the Federal Government?
Mr. STEWART. I do not mean that the Government should assume
all of the responsibility, but there are certain things, like the collection of information, which the Federal Government must undertake if it is to have a complete survey, because the States do not
do it. F o r instance, we have five States that do not report industrial accidents at all and that have no workmen's compensation law.
We can not know how many accidents there are in the United States
so long as those five States do not report unless wTe go down there
and get it ourselves.
The CHAIRMAN. Have you taken any action with respect to gett i n g those questions answered in the United States census ?
Mr. STEWART. I have. That is to say, I have asked the secretary
to write to the Secretary of Commerce to have those questions introduced in the census. That was months ago. I am sure that we have
written two letters. Of course, at that time the census had reached
no conclusion in the matter. I don't know whether they intend to
introduce those questions or not.
The CHAIRMAN. Have you anything more that you would like to
say, Mr. Stewart?
Mr. STEWART. On the question of employment offices in the United
States, as I said, Mr. Jones has more to say about that than I, but
on the question of employment offices in foreign governments we
have here in the December, 1928, Monthly Labor Review an article
on the employment offices and employment insurance covering the
whole question as far as Europe is concerned, which I should like
to submit to the committee as a part of the report.
The CHAIRMAN. Have you made any study at all as to the possibility or the desirability of cooperation between the Federal, State,
and private agencies of employment? Just how could they cooperate ?
Mr. STEWART. That really is a question for Mr. Jones to answer.
They have been through that, I have not. Before I leave I would
like to say that a survey of the unemployed in England and the
study of the industrial history of 11,000 cases developed the fact
that 57.7 per cent of the unemployed had no trades, never having
been apprenticed and not having rubbed off enough in any industry
io constitute a trade. Of the insured, only 7 per cent of those who



had a trade or had had a training were unemployed in 1926, while
12 per cent of the total of uninsured were unemployed, which indicates just as we have here, that it is the unskilled labor that is being
thrown out by these new developments and new changes, and that
makes them exceedingly difficult to reabsorb.
The CHAIRMAN. According to the testimony as I recall it, given
by President Green of the American Federation of Labor, the fact
that some of these men were trained men made it more difficult to
absorb them. For example, he referred to the telegraphers who were
out of work because of the radio and to the musicians who are out of
work because of the talking movies. They were of such a specialized
character that they were little fit for anything else.
Mr. STEWART. I t would operate in that way with the highly specialized. On the other hand, they are comparatively few.
The CHAIRMAN. I would not say that.
Mr. STEWART. As compared with the common labor. This new
machine that proposes to set type on the piano-player scheme and
operate a linotype by telegraph 500 miles away, 25 or 30 of them at
a time, is eventually going to practically end the printing trade.
The CHAIRMAN. Then what will the printers do after all of tlieir
training ?
Mr. STEWART. I do not know. I will say this. Take the printers?
and they are as a class, of a grade of intelligence sufficiently high that
their chances of absorption in some other industry, barring the question of age, would be greater than an equal number of common
laborers. Then take this new scheme of development of cultivation
of the farm. Everything that can be planted in rows can be treated
with this mulched paper, which not only keeps down t'he weeds, and
makes cultivation entirely unnecessary, but insures a crop and an
increase in the percentage of crop the first year which more than
covers the cost of the paper, and the paper will last from four to five
years. The agricultural laborers as a rule, and I want to insist upon
saying " as a rule " because there are a great many exceptions, are
not the type of men who can readily be absorbed in anything else,
except some kind of common labor, and, when an agricultural laborer
goes to the city he finds that the conveyer and the hoist truck have
taken away all of the jobs which he might have gotten. I am not
saying that there is no absorption, but it does seem to me that there
must come a limit to the absorption. Take, for instance, the proposition to make paper milk containers as against the glass bottle. They
not only are cheaper, but they are lighter, and a man on a motorcycle with a side car can handle as much as a truck with two men
now, and it is coming all along the line. Take this new engine which
has just been invented, which weighs practically a million pounds,
wdiich is 125 feet long. I t can carry three ordinary freight trains
over a mountain. I t is going to do for the railroad people just what
the linotype did for the printer at first. Of course, that readjusted
itself. How far this question of readjustment can go, nobody can
state, and that these questions are local does not appeal to me; that
they are State problems, does not appeal to me. They are world
The CHAIRMAN. There is no question about it. I do not disagree
with you about the question of the problem part, but the question is
as to who should solve the problem. I n other words, has the Federal



Government the power and the responsibility of solving all these
problems? I n other words, are we going to have such a highlydeveloped centralized Government that we are going to assume all
the responsibilities of sociology and economics without any aid from
the States, or without any initiative on the part of the States ?
Mr. STEWART. I think it is the Federal Government's business to
at least compile the initial information from which to work.
The CHAIRMAN. And that you think, perhaps, is the limit to which
it should go ?
Mr. STEWART. That is a pretty long step. We would be pretty
well satisfied if we could get that.
The CHAIRMAN. Have you anything more to say ?
Mr. STEWART. I don't know that I have anything more to say. I
will just leave these copies of the Monthly Labor Eeview with the
article about foreign-employment service for the benefit of the other
members of the committee.
The CHAIRMAN. Before you leave, when you responded to Senator
Wagner's resolution with respect to the number of the unemployed
Mr. STEWART. NO ; I said the shrinkage in employment. I did not
say the number of unemployed.
The CHAIRMAN. YOU did not wait until I had finished the question.
I t was generally reported that you stated that a certain number were
Mr. STEWART. I did not.
The CHAIRMAN. The press

got that report, and there was agitation
as to the accuracy of the statement.
Mr. STEWART. I never made a statement as to the unemployed. I n
1921 I made an estimate of the probable unemployed. No; I will
take that back. That was not a b a t e m e n t of the unemployed. I t was
a statement there again of the shrinkage from the peak of the employment in 1920 to the depth of the unemployment or the shrinkage
in employment in July, 1921. I have no means any more than estimating the unemployed.
The CHAIRMAN. Did you estimate the unemployed in response to
the Wagner resolution ?
Mr. STEWART. N O . I estimated the shrinkage in the employment.
The CHAIRMAN. I recall that toward the end of the last session
there was considerable agitation, political and otherwise, as to the
volume of the unemployed.

antiaclministrationists were saying that the
unemployed was something about 4,000,000.

they called upon the Department of Labor
to give us information as to that, and, as I recall, there was some
report saying there was about a million eight hundred thousand unemployed instead of 4,000,000.
Mr. STEWART. I n that report I said that the shrinkage in the volume of employment, the shrinkage in the number of men on the pay
roll was 1,874,000. I did not say that that was the number of the
unemployed. I have never said anything of the kind. The estimate
in 1921 of 5,735,000 was the shrinkage in the volume of the pay roll.
The CHAIRMAN. By dollars or the numbers of men ?



Mr. STEWART. The numbers of names on the pay roll.
The CHAIRMAN. That is a very inaccurate report, is it not? I.
mean that it is a very inaccurate representation in view of the fact
that a man may be on the pay roll for one day a week, and not six
days a week, and yet counted as being employed?
Mr. STEWART. We took the average of a single pay roll. T h a t is
all that we can handle.
The CHAIRMAN. I n other words, it does not paint a picture at all
of real economic conditions, because, as I say, a man may be working
one day a week or five days a week,, and the fact that he is on the
pay roll does not indicate his economic condition at all.
Mr. STEWART. I t does not show the part time. However, we have
since introduced the element of percentage of full-time operation of
the plant, which helps in that a little bit. We also take the volume
of money in the pay-roll period, as that goes up and down. If it
goes down without the number of employees going down, it shows
short time. If it goes up without a change of employment, it shows
an increase in employment. Admittedly it is not a complete picture,
but it is the only picture we have, and the only picture we could get
with the funds we have.
Mr. STEWART. I n 1928 we got the city of Baltimore to make a
police census of the unemployed, which showed about 2 per cent.
The CHAIRMAN. When you say 2 per cent, then you mean 2 per
cent of the employable or 2 per cent of the population?
Mr. STEWART. TWO per cent of the population.
The CHAIRMAN. That does not mean very much either, does it ?
Mr. STEWART. N O ; but it is the only thing we have that means
The CHAIRMAN. I think sometimes a bad picture is worse than no
picture at all.
Mr. STEWART. After all, nearly all of the figures we have applied
to the population as a base. There is not any question in which it is
not more or less deceptive. When you say that 75 per cent of the
people of Michigan or of Iowa can read and write, the other 25
per cent may be too young to have learned to read and write. You
can not tell anything about it. But that being your base, that being
the base of your census, you can only make comparisons upon the
census figures where they are the only figures that you have.
The CHAIRMAN. Prior to coming down here, Mr. Jones, did you
give any consideration to the questions raised in Senate Resolution
Mr. JONES. I have; yes.
The CHAIRMAN. Have you a statement to make?
Mr. JONES. I have no particular statement, unjess you ask me a
question. I shall endeavor to answer you.
The CHAIRMAN. YOU see the questions that we were instructed to
investigate, and I thought perhaps you had prepared yourself to
answer those questions.
Mr. JONES. I have not prepared any statement. I have just returned from an official visit, looking alter some of our work. Per



haps you want to know the number of offices we are in cooperation
The CHAIRMAN. I think you had better talk with the Secretary and
prepare a statement in answer to the questions, such as your department can answer. I refer to the questions propounded or required
to be answered in this resolution. I n other words, it is not practical
for me to go down through the list and ask questions with respect to
each one of these subjects, because, obviously, I do not know the
extent of them all. I understood from talking to Secretary Davis
that he would send somebody down here who was prepared to give
us the information that the department has about these particular
questions, such as feasibility of cooperating with Federal, State, and
private agencies, and the establishment of systems of unemployment
insurance or unemployment reserve funds, or the establishment of
employment agencies throughout the country.
Mr. JONES. I shall be glad to answer regarding the establishing
of public employment offices throughout the nation. My personal
information is
The CHAIRMAN. I do not want your personal information. I
want the information of the department if I can get it.
Mr. JONES. The establishment of public employment offices in the
States is primarily a function of the State. I believe the Federal
Government should cooperate and coordinate the efforts of all of the
States in conducting public employment offices.
The CHAIRMAN. Have you given any consideration to any of these
bills introduced by Senator Wagner?
Mr. JONES. I have read Senator Wagner's bill.
The CHAIRMAN. Take, for instance, S. 4167, introduced by Senator
Wagner April 20, 1928. I t provides for the establishment of a national employment system, and for cooperation with the States in
the promotion of such system and to regulate the expenditure of
moneys that shall be appropriated for such purposes. You say that
you have read this bill?
Mr. JONES. Yes.
Mr. JONES. My views

are your views about it ?
are that $4,000,000, as I recall the amount,
suggested to be appropriated for the national service
The CHAIRMAN. I suspected that money would be the first appealing factor.
Mr. JONES. I think that is too much to conduct a United States
Employment Service. I t is not necessary that we should have $4,000,000 to conduct a public employment service in cooperation with the
States, provided the States will do their part. I would not want
$4,000,000 and be obliged to expend it in one year.
The CHAIRMAN. I t does not require that. I wish you would take
up with the Secretary the preparation of a statement concerning
each one of the sections
Mr. JONES. I shall be very glad to do that.
The CHAIRMAN. I n this bill, and the opinion of the department,
including the Secretary's opinion and your own, or anybody else who
is consulted, and I wish you would also give us an opinion on Senator
Wagner's bill, S. 4158, introduced February 20,1928, which provides
in addition to the act of March 4, 1913, for the collection of certain



statistics. I assumed when I talked to the Secretary that he would
have a complete answer to all these questions before the committee
which have any bearing on unemployment.
Mr. JONES. The Secretary asked me to come before the committee,
and I was not aware of the questions you would ask. If I am asked
questions I will endeavor to give you intelligent answers along the
lines of our experience in the United States Employment Service.
You want me to give answers to Senator Wagner's bill ?
The CHAIRMAN. S. 4157 and S. 4158, and also S. 4307, which provides among other things that there shall be a Federal unemployment
stabilization board, of which the Secretary of Labor will be a member. I would like to have the reaction of the department on that so
far as it affects the Department of Labor, and I would like to have
any other information that the department in ajl of its ramifications
has to offer which will aid the committee in studying this resolution
and, perhaps, arriving at something constructive. I do not want to
have to do all the work of analyzing the questions and propounding
them here. I think the department ought to furnish us with the
information that it can, and if any questions occur to us when hearing those, we will ask them.
Mr. JONES. Very well, I shall see the Secretary to-day.
The CHAIRMAN. Have you any idea when that will be ready ? You
better call me up after consulting with the Secretary.
Mr. JONES. YOU want me to take sufficient time to consider it ?
The CHAIRMAN. Yes; within two or three days.
Mr. JONES. Thank you, Senator.
Question 1: Is there in your opinion any trustworthy data on the extent of
unemployment in the United States?
Neither on the total volume of unemployment, nor on its distribution among
industries, nor on its geographical distribution, nor on its duration, is there any
direct evidence worthy of serious consideration. Such data as are available
for organized trades are not representative of the gainfully occupied population as a whole. And such intensive local surveys as have been made in scattered places (e. g., in Columbus and in Baltimore) form too thin a sample to
yield valid indications of national conditions; moreover, they differ too widely
in scope, definition, and other technical respects.
To definite true " unemployment" in a manner both sound from an economic
point of view and workable from a statistical point of view in questionnaire
or field canvass is difficult. But even when so defined a special national survey
by the direct method would be prohibitively slow and expensive. The student
of unemployment is therefore thrown back upon the indirect method—that based
upon changes in employment—and even then with results by no means conclusive. This method, with all its drawbacks, has two advantages: (1) That
the fact of a person's being employed is inherently easier to define and determine than the fact of his being truly unemployed in an economic sense; (2) that
collecting data from employers by mail is far easier than canvassing individual
Question 2 : In what ways clo you think the present statistics on emplovment now being compiled by the Bureau of Labor Statistics could be improved?
(a) By collecting current monthly data from a wider coverage of employments than has been customary in the past. Until the summer of 1928 prac



tically no current figures on employment were available except for Class I
railroads and for factory industries. At that time the United States Bureau
of Labor Statistics began to expand its collecting machinery, in order to cover
employment in mining, in public utilities of various sorts, in retail and wholesale trade, and the like. The reporting sample in these lines is being increased
as rapidly as conditions permit; also, additional lines of activity will probably
be covered in due course. This is a thoroughly commendable course, indeed
the only workable one, for throwing light upon the unemployment situation
currently. As the numerous gaps in the employment evidence are gradually
closed, we shall be able to tell to what extent the release of workers from
some employment is being balanced by improvement in other lines, and to what
extent such an outlet is nonavailable, thereby causing unemployment. In the
past year or two there has been excessive apprehension in the public mind,
because when factory and railroad employment declined it has often been
assumed that the released workers became unemployed, whereas if the facts
were all on record we should doubtless find that many had picked up in other
lines for which employment index numbers have not been available.
(&) By periodically making suitable adjustments of the employment index
numbers, to bring them into alignment with pertinent evidence from other
sources, such as the biennial censuses of manufacturers. Past investigations
by outsiders have conclusively shown that the sample data collected currently
from reporting manufacturers by the United States Bureau of Labor Statistics
yield index numbers which (for technical statistical reasons) are biased downward. That bias has contributed to the exaggerated views of the extent
of unemployment. That such adjustment of the sample data to the more
complete data in the censuses is practicable, is evidenced by the fact that the
Federal Reserve Board has already made it, and regularly publishes the results
each month.
Question 3 : What suggestion would you make for a plan for keeping
a more or less current index of unemployment?
In my judgment, the only practicable method is to expedite the project
mentioned under heading 2 (a), then drawing the necessary inferences from
the complete evidence on employment changes in conjunction with evidence on
growth of the employable labor supply—population, immigration, and emigration, etc. Monthly or quarterly data from trade unions on percentage of members unemployed would give a useful, even though necessarily limited, check
upon such inferences. Past studies have shown that unemployment indexes constructed from trade-union data in New York State and in Massachusetts have
considerable barometric merit, i. e., as indicators of increase or decrease in
the severity of unemployment, even though they are of very doubtful merit
as measures of the number or percentage actually out of work at a given time.
Question 4 : Would a census of unemployment taken in conjunction with the
census of 1930 be of any aid in the compiling of a monthly index on employment
for the years following 1930?
As a check upon current estimates derived by other methods, such a census
would prove highly valuable, provided that the one or two necessary questions
be properly formulated, that the field canvasser secure bona fide answers,
and that the results be properly tabulated in the census publications.
A subcommittee of the Committee on Governmental Labor Statistics in the
American Statistical Association has recently considered at length the possibility of including some such question in the 1930 census of population (occupations). Their recommendation, which I quote below, would involve only slight
modification in the items already included at each census as to the occupation
and the industry in which the worker is ordinarily gainfully employed:
"A. That the following two questions should be asked on the subject of
employment and unemployment, and that they be put first, thus following
good psychology in the interview:
"(1) If you are ordinarily gainfully employed are you now out of a job
of any kind? (Yes or no.)
" (2) If you hold a job of any kind, are you on lay off without pay to-day?
(Yes or no.)
" It would be assumed that these two questions would have to be coupled
with information regarding the occupation, and we have only minor changes
to suggest in the form used in 1920. Our suggested additions are underscored
in the following list:



"(3) Trade, profession, or particular kind of work now being done (or, if
out of a job, work done when last employed), as spinner, salesman, laborer,
"(4) Industry, business, or establishment in which at work (or, if out of a
job, in which last at work), as cotton mill, drygoods store, farm, etc.
"(5) Employer, salary or wage worker, or working on own account.
" B. That the occupational distribution used heretofore should be continued
in the census of population, and in addition, the data should be classified for
persons employed and for persons unemployed under the industrial headings
used in all the other censuses, such as those of manufactures, agriculture,
mines, and the proposed census of distribution."

([Thereupon, at 11 o'clock and 30 minutes a. m.? the committee
adjourned subject to the call of the chairman.)


Washington, Z>. 0.
The subcommittee met at 10.30 o'clock, a. m., January 14, 1929,
in Eoom 212 of the Senate Office Building.
Present: Senator Couzens (chairman),
Present also: Dr. Isador Lubin, special assistant to the committee.
The CHAIRMAN. Major Williams, you know the purpose of the
hearing and what we are taking up ?
Major WILLIAMS. I n a general way, yes.
The CHAIRMAN. Have you seen a copy of the resolution?
Major WILLIAMS. I don't know that I have.
The CHAIRMAN. I will hand you one, and ask you to look it over,
as it will enlighten you somewhat as to what we would like to have
you talk about.
Major WILLIAMS. I am more or less familiar with the Jones bill,
and I assume that it is along that line.
The CHAIRMAN. GO ahead and tell us what you can about the
Major WILLIAMS. Perhaps it would be proper for me to say a
word first as to the organization that I represent, the American
Engineering Council. That is composed of representatives from
some 40 or 50 engineering organizations throughout the country,
the representation being in a measure in proportion to membership.
I t involves a membership of about 43,000 at the present time. I do
not say that to be impressive, but it simply indicates that there are
that many engineers in the country, who are taking some interest in
public affairs.
The CHAIRMAN. That does not mean that all that number has
passed on the merits of the Jones bill or the Jones proposition.
Major WILLIAMS. Very few have seen it, any more than when
Congress passes a bill does it mean that every citizen in the United
States is conversant with that bill. The organization of the American Engineering Council is similar to the organization of the lower
House of Congress. The purpose of the organization primarily was
to place the service of the engineers at the disposal of the Government in dealing with those questions upon which their advice might
be of value. I t is not a self-seeking organization in any way.




Nobody is getting any salary except the executive secretary and his
corps of clerks, and whatever time is put in is put in gratuitously.
We are allowed traveling expenses to attend to the business of the
The CHAIRMAN. And your position is what ?
Major WILLIAMS. I am one of four vice chairmen of the council.
This subject of endeavoring to balance the ups and downs of industrial performance is one that has received considerable attention on
the part of the council and considerable attention on the part of
myself. I had the fortune, or the misfortune, to be in the municipal
employ of the city of Detroit during the panic of 1893-1895, when
I was civil engineer at the board of water commissioners, and the
things that I saw then impressed me very strongly with the desirability of some measures being taken to provide against a recurrence
of those conditions.
The CHAIRMAN. Have we made any progress since those days ?
Major WILLIAMS. YOU mean in Detroit, or along that line?
The CHAIRMAN. Along that line.
Major WILLIAMS. I think this investigation indicates progress.
U p to this time, or up until a couple of years ago, I don't think
there has been much made.
The CHAIRMAN. Have you familiarized yourself with the so-called
Harding-Hoover unemployment conference in 1921?
Major WILLIAMS. I knew something of it, but I have not studied
the record of it carefully. I t has seemed to me that one of the things
that perhaps has application in the experience of the engineers is that
i t is often easier to prevent a thing occurring than it is to stop it after
i t has got going. I look upon the proposal of the Government so
adjusting its affairs that it can at times throw into the balance an
increase of employment, though not much compared with that of the
country, still an item, as being a factor, and likely an important factor in regulating depressions. I have a sort of belief that the psychological fact of its being known that if things got to going bad the
Government will come to the rescue, in the mind of the general
public would convey the idea rather of a large bit of assistance,
although it may not be so large as compared with the general country,
but for that reason I think that anything that the Government finds
it possible to provide for will be advantageous in the end.
There are two or three questions in connection with that that I
think are important. One is the proper method of handling the
situation, and that is one that I do not feel competent to pass on any
more than possibly pointing out one or two things that should be
avoided. There should not be, as was the case in our municipal
affairs in Detroit in 1893, an appropriation of a considerable amount
of money to be expended and then hunting for some place to spend
it. I was in a position then where I was called upon to hunt up all
of the work in the city that might be needed, and the board appropriated money to carry out those things and matters were not given
the study that they should have. I don't think any great mistakes
were made in the rather unimportant work that I was responsible
for, but I could readily see if that were the procedure in the case
with the General Government it might lead to excessive loss or failure
to get value received. For that reason it seems to me, and it has
seemed to the council, that there should be a more far-reaching



plan of public improvement laid out, that we should not go on in
so much of a haphazard way. Public work at present is laid out
very largely, you might say, from hand to mouth. An idea comes
up to-day and the Congress deals with it, wisely ordinarily, but
not so well as if these things were being continually studied by a body
of men who were qualified to do so, and who would lay out a program
of, say, five years' work ahead. Then if an occasion of this kind
arose you would have work already planned and approved upon
which money could be expended wisely and properly. That of course
calls for a greater coordination of our public works functions than
we have at the present time. One of the weaknesses of our present
system is that there is no coordination.
The CHAIRMAN. Coordination between whom?
Major WILLIAMS. I am speaking of our various public works;
our highways, our waterways, our railroads. They are all really part
of a great transportation system and they should be worked # out so
as to complement and supplement one another, whereas as'things
exist now they are carried out without any reference to each other.
That is simply an example. Of course there are other activities in
the matter of public buildings and so on. That is not so important.
They stand in large measure by themselves, but I think whatever is
connected with our transportation system ought to be under a single
ultimate control; that is, it ought to head up somewhere in some
sort of an advisory board that would exercise a certain direction of
what is undertaken.
But that is only one single phase of this whole proposition. If
the Government is going into this thing, its public work ought to
be so controlled that it can be handled so as to put the money where
it will do the most good. I t will be not particularly desirable, I
think, to increase public expenditures in New York when the difficulty is out on the Pacific coast. Then another element that comes
in is just how we are going to start or what is going to be the key
by which the governmental aid would be distributed, and I think
that is one of the great questions to be studied in endeavoring to arrive at any solution in the way of the application of an appropriation.
The CHAIRMAN. That would require some sort of system of either
employment agencies or reporting agencies as to the exact condition ?
Major WILLIAMS. Yes. Of course, the ideal condition would be
based on information as to unemployment, but that may involve an
amount of statistical information that is not available at present, and
which may be very difficult to get. I t may be necessary to select
some other key, as you may say, but the ideal method would be statistics of unemployment, and if those are not available you have to
go to the other side and take some measure of employment, the amount
of production that is going on.
The CHAIRMAN. Have you had any experience in employing large
numbers of persons ?
Major WILLIAMS. Not what would be called a large number of persons to-day. Of course, I have been in positions where I have been
called upon to have a few hundred men under me, in one way and
another, but no such number as you yourself have had, Senator.
The CHAIRMAN. Yes; but have you experienced any of the evils
of unemployment ? Have you seen any of the evils of unemployment
outside of your experience with the water board in Detroit?



Major WILLIAMS. I have seen it at various times all during my life.
I was born and brought up in the Saginaw Valley, and we used to
have all manner of bad times up there.
The CHAIRMAN. D O they still have them?
Major WILLIAMS. Not to the extent that they used to. I think the
Federal Reserve Act has done a great deal toward ameliorating the
possibilities of those disturbances that used to come almost periodically, and were very much worse than anything we have had since.
The CHAIRMAN. Have you had any experience with any State or
private employment agency?
Major WILLIAMS. N O ; I can not say that I have, any more than
when we have wanted men and have gone to private agencies and
obtained them sometimes and sometimes not.
The CHAIRMAN. So that your main line of testimony deals with
the question of public planning for a program of State employment ?
Major WILLIAMS. Yes; I should say that is the main proposition
I woulcl put up to you here as a general one. I believe this—that
if the General Government started a program of this kind it would
be followed to a greater or less extent by the State governments.
The CHAIRMAN. Did you see the report of Governor Brewster or
mention of it at the time he spoke at the convention of governors
in the city of New Orleans ?
Major WILLIAMS. Yes; I saw that.
The CHAIRMAN. I t was generally supposed that that was approved
by President-elect Hoover?
Major WILLIAMS. I t quite possibly was.
The CHAIRMAN. Did you study the plan as he outlined it at the
governors' convention?
Major WILLIAMS. I could not say that I studied it, but the general
impression I got of it was that it had not been thoroughly discussed,
that it was an idea set out in a rather appealing fashion, or a fashion
to attract attention, but that so far as being a workable program,
it did not impress me as having gotten to that detail.
The CHAIRMAN. D O you believe that this program can be centered
in any one point, or do you believe it would have to be done by the
Federal Government and the several political subdivisions.
Major WILLIAMS. T O get the most out of it you have to bring them
all into it, but my belief is that if the Federal Government started
it, the States would follow pretty soon, and there might be developed,
probably would be, a system by which they would all " play the
game," so to speak. Of course, the Federal Government has no
power to compel that.
The CHAIRMAN. N O . Would it be your opinion that it would be
wise to do it under a generaj head, or had we not better leave it
to the individual initiative of the several communities and States?
Major WILLIAMS. I rather feel that so far as the national depressions are concerned, the Federal Government might wisely lead.
Of course, if it is simply a local affair like a slump, perhaps, in
the automobile trade, I should say that that would be a matter for
the State to take care of itself.
The CHAIRMAN. Of course, the best that might be done, it seems
to me, would be for the Federal Government to set the example and
for the various political subdivisions to follow. The plan was rather
ridiculed by some of the press at the time—that is, the plan pro



posed by Governor Brewster—on the assumption that it was contemplated to accumulate in one place and spend some $3,000,000,000
for public improvements. Did you get any such conception as that
from the plan?
Major WILLIAMS. N O ; I did not. I quite agree with you that
what the General Government would be doing would be setting an
example, and that the General Government is probably in a better
position than any State government to be the leader for the reason
that it is in possession or that it can get itself into possession of the
information necessary to make an intelligent start. When the General Government says that the condition exists where help is needed,
then the State would undoubtedly to a very considerable extent follow
suit. But I hardly conceive that the States would be in as good
position to carry out a program of that kind as the General Government. That is, the General Government would be in a position to
start it more quickly than the States.
The CHAIRMAN. I think that the smaller unit would start more
easily. I n other words, if the State of Michigan had a depression,
and they have a program now for spending some $25,000,000 for
Major WILLIAMS. Highways?
The CHAIRMAN. N O ; for keeping the mentally deficient; they are
backward in that respect; and it is conceivable that the legislature
might appropriate that and leave it up to the governor or to his administrative board to spend it here and there, wherever it would do
the most good, to stabilize employment. I think that sort of unit
is more easily operated than the Federal Government is.
Major WILLIAMS. There has been a suggestion with regard to the
Federal appropriation that it might be handled by providing for a
reduction of the payment of the public debt. That struck me personally as rather a good suggestion. That is, that in time of such
emergency when funds were called for immediately, and for the
prosecution of public work in relation to unemployment, that for
the time being the payments on the public debt might be suspended,
to avoid a special taxing or selling of additional bonds to supply the
money, that you would simply temporarily reduce the payment of
the public debt, and that would avoid the necessity for creating a
reserve; and to some of us it looks as though a reserve set up for
this purpose might not be altogether desirable. You as a business
man probably appreciate that.
The CHAIRMAN. That is a mere piece of mechanics that does not
present any obstacles, because we have deficiency appropriations
right along; and I think they can be provided for at the proper
time. Have you any other advice that you can give the committee
with respect to this resolution?
Major WILLIAMS. I don't know that I have, Senator. I was
called here rather unexpectedly.
The CHAIRMAN. Doctor Lubin, have you any questions that you
desire to ask?
Doctor L U B I N . I wondered if I might ask a |uestion about the
advisability of collecting information so that w€g» might have some
index that would guide us in the event we wanted to do something.
Are you at all acquainted with the available statistical information on
the subject of unemployment and employment?



Major WILLIAMS. I could not say that I am well acquainted with
it. I know something of it, of course, but it is far from complete.
My information is that you do not have at the present time suitable
information to use, and unemployment information is the key to
the operation of this program. What the cost would be of getting
satisfactory results, how much that would involve, I don't know,
but the cost, I think, would involve rather a large program.
Doctor L U B I N . You know the index they use in the Jones bill in
regard to building construction?
Major WILLIAMS. Yes.
Doctor L U B I N . D O you think that is a worth-while index?
Major WILLIAMS. I did not approve of that index in the form it
appeared in the bill for the reason that as I recall it the bill provided that the index basis was the contracts awarded for construction.
A contract may be awarded that means five years' work, or that
means six months' work, and the one that means five years may be
awarded this month and next month there may be no corresponding
contract awarded, so that that measure taken as from month to
month or even from year to year would, I think, be likely to be misleading. I t would seem to me that it would be better if it wera
worked on something that was more immediately responsive to the
condition, as, for instance, the orders for materials actually placed
or shipments, something that gets closer to the immediate daily
performance. The trouble with the contract is that we don't know
whether it is going to be executed this month or next month or five
years from now.
Doctor L U B I N . Do you think it advisable to elaborate the material
we are already collecting on the question of unemployment and employment %
Major WILLIAMS. I am not prepared to pass judgment on that, but
it would seem to me that if anything of that kind is done it would
be desirable to pick out possibly certain key agencies or key industries that would be fairly representative of conditions in various
parts of the country and depend upon the statistics from those rather
than trying to get everything, because the cost of getting everything
would be, I think, almost prohibitive.
The CHAIRMAN. Are you familiar with the method used by the
Labor Department in computing emplojonent?
Major WILLIAMS. I am not familiar with their actual processes.
Of course, I see their reports occasionally.
The CHAIRMAN. Have you any other questions, Doctor Lubin ?
Doctor LUBIN. No.

The CHAIRMAN. Are you now connected with the University of
Michigan ?
Major WILLIAMS. N O ; I left the university in 1911 and have been
in private practice as a consulting engineer since that time.
The CHAIRMAN. Thank you very much for coming down here.
Major Williams.
Many sound and well-managed businesses stood on the brink of disaster in
1921. During the preceding century, periods of depression similar to 1921
occurred every 5 to 10 years. During these successive periods many a capable



business man, after a lifetime of success, contemplated a bullet in the brain
as the only way out. Bread lines were long and desolate as the faces of the
hungry unemployed. The picture of an army of willing and capable workers
idle through no fault of their own was made a bitter indictment of the ruling forces of society, whoever these were supposed to be. Capitalists, profiteers,
labor-saving machinery were the favorite devils—large-scale machinery that
eliminates workers faster than the consumers' market develops. Waste, suspicion, fear prevailed until the need was felt of a remedy rather than a
convenient devil to relieve the emotion upon.
The public works reserve is one of these constructive economic remedies,
not a universal panacea, but a necessary governmental contribution to any
effective program, even after employers and industry have done their utmost.
It is a determined policy to expand and contract public works in accordance
with the ups and downs of business activity.
The United States Senate has before it two bills to develop this policy.
One has been piloted by Senator Wesley L. Jones, of Washington, to a favorable report by the Committee on Commerce and to the floor of the Senate.
This "prosperity reserve" bill (S. 2745) authorizes a reserve of $150,000,000
to be expended upon Federal public works only when an industrial storm is
rocking the ship. The storm signal is a 10 per cent fall in the volume of all
construction contracts for a three months' period as compared with the
average of the same period for the three preceding years.
Picture what would happen if this bill passes and a depression occurs. The
construction bureaus of the Government would have had years of notice to be
ready with plans. The Supervising Architect of the Treasury, for instance,
would have specifications ready for post offices in all the towns which Congress
had authorized but not appropriated for. The Bureau of Public Roads would
have made its plans to speed up the extensive road building which it helps
the States pay for. The storm signal is hoisted. The President, under the
terms of the bill, asks Congress for the appropriations previously authorized.
The old-time debates are short-circuited as to whether there is unemployment,
if so whether it is greater than at some -other time, or greater than when the
debate began. The number of unemployed has always been as troublesome a
question as "How old is Ann?" Whatever is to be done will be done promptly.
Work will be started. Materials will be made. Commodities will flow over
the railroads, and new purchasing power created.
If Congress should not be in session some unavoidable delay may occur, but
in recent years Congress has been in almost continuous session. Anyhow, we
must accept this limitation because Congress would give the Executive branch
a free hand with such a potent reserve only with the greatest reluctance.
In discussing the Jones bill Senator Robert M. La Follette, jr., asked if the
amount of construction contracts was the best index of business activity.
Ex-Senator George Wharton Pepper replied: " Perhaps not, but it is the
simplest. The world can not be saved by any complicated scheme." Salvation
by higher mathematics would bring unemployment to St. Peter himself. " I
think." Senator Pepper resumed, " that this simple proposal can be presented
to the public mind in such a way that the cities and States will follow suit."
So the volume of construction contracts was chosen because so simple and
because so quickly and authoritatively ascertained—like stock quotations. It
is far from being a perfect index, but all others suggested had greater disadvantages.
The appropriation authorized in the Jones bill doubles the usual annual sums.
The kinds of public works are to be the usual ones—roads, public buildings,
river and harbor work, and flood control. When general construction falls
10 per cent Federal construction is to double. No one has to take the responsibility of saying that times are bad and thus bring maledictions upon himself
for being the bearer of bad news. The signal is nearly automatic. No interpreter of business conditions is required. By a preagreed signal the prosperity
reserve is to be released t(x sustain or restore prosperity..
The idea behind prosperity reserves is old and respectable. The pyramids
are said to have been built by the unemployed. Before the French Revolution
the great Finance Minister Turgot tried to breast the rising tide of desperate
unemployment and starvation by a public-works program. Frederick the Great
of Prussia had the canny habit of keeping his soldiers profitably and safely
busy between wars by setting them to drain the worthless swamp lands now
so productive. The distinguished engineer, Rawlinson, inspired the British
Government to provide employment for the operatives of the cotton manu



facturing cities whose populations were thrown out of work by the blockade of
our southern ports during the Civil War. In post-World War England a
half-hearted effort was made to expand public works. Germany during the
darkest days of discouragement and inflation executed an intelligent and extensive program. More of Frederick the Great's swamp lands weie transformed into good farms. Electric-power plants, canals, and roads were built.
Work was expanded in direct relation to the amount of registered unemployment. France, in 1910, theoretically accepted long-range planning of railway
equipment, but the war intervened and the plan apparently was forgotten. In
this country the first move was made by Senator William S. Kenyon, of Iowa,
who sponsored the forerunners of the present bills in 1919 and 1921.
Most of these European samples differed fundamentally from the bills now
before Congress. They were makeshift attempts to install brakes when the
automobile was plunging down hilL They sought to relieve needy, unemployed
individuals rather than to stabilize general employment. They sought to
make work. They employed the idle whether fitted for the job or not instead
of setting in motion a purchasing power which would stimulate a general
demand for many products.
The United States 1929 models have 4-wheel brakes in place while the car is
still on the upgrade. And the fuel reserve is in the reserve tank. They are
not concerned with relieving idle textile workers by giving them road jobs at
less than standard wages (as an early British example). They propose to
employ construction workers on construction jobs at usual wages. They will
purchase materials such as steel, glass, cement, bricks, and the products of
23 other industries, as made by the usual workers in those industries. They
propose no relief scheme, but an economic measure. They embody a principle
recognized only in our generation, that " the purchasing power of the average
man is the spring of prosperity." The 5 and 10 cent man is the giant of
economics. He dominates the demand for many industries, each dependent
upon another.
The interdependence of apparently unrelated industries is close. When the
workers in industry Number 1 are .thrown out of work they purchase less
goods of industries Number 2, Number 3, and Number 4, whose workers are
then thrown out and purchase less of the products of industries Number 5,
Number 6, Number 7, and Number 1. Who could guess that the fruit crop
determines the demand for manicure sets? A wholesale hardware house made
a fortune by finding this out. A hundred traveling salesmen were required to
report weekly the condition of the by-product fruit crops in grain territory.
The house had observed that when the grain crop was profitable the farmer
bought tools and machinery, but if the fruit crop was good, the proceeds were
the wife's perquisite. She bought manicure sets and kitchen utensils, and this
house was ready with the goods in the neighborhood store. Industries lean
on one another like the walls in a house of cards—to hold one another up or
to push one another prostrate.
Fortunately, what looks like a total prostration of industry is far from it.
The worst depression is only a 15 to 20 per cent fall in production. Therefore,
a relatively small amount of new orders, such as a public-works program can
reasonably offer, will do much to sustain the structure, for new orders multiply
themselves with surprising rapidity. The American dollar in circulation is a
speed devil. It may jump quickly out of your pocket, but the next fellow
is also competing for the record. The dollar, like Paddy's flea, is never where
it was. Look for the public-works dollar where it was—in public works—and
it is not there, having jumped into a corner of the storekeeper's pocket. It
jumps so fast that you can not trace it, but, like the flea, it leaves its mark.
The steel worker feels it and the ice-cream man, an excellent thermometer of
prosperity. The teddy-bear maker and the garment worker feel it. It wakes
the alarm-clock maker and speeds up the scooter specialist. It creates jobs
as apparently unrelated to public works as Spitzbergen is to Africa.
A few hundred millions of new public works credit is like the flow of water in
an irrigating ditch. It spreads above ground and underground. Only the
result is seen, the magic touch into life. The trouble has been to start the flow
of credit when needed. Credit has been frozen like ice in the mountains when
the fields below were parched. Sometimes credit has thawed. The President's
conference on unemployment in 1921, under Mr. Hoover's leadership, called
upon every community to expand public works as part of a national program.
The flow of credit was doubled. In 1921 the cities sold twice as many bonds
as in any previous year, and kept it up in 1922. Conditions were favorable
because the World War had dammed back public works as nonessentials.



T h e cities h a d conserved their borrowing power. T h e period of t h e g r e a t
tide of public works was t h e period of business revival. Public works w e r e
not the sole cause but s t a r t e d other activity. Courage and confidence revived.
A change in public psychology brings a change in conduct. H e n r y S. Dennison, president of the Dennison Manufacturing Co., p u t this clearly before t h e
Senate Committee on Commerce: " When the merchant is saying, * By golly,
we can't buy freely,' and is cutting his o r d e r s ; when the manufacturer finds
his inventories piling up and says, 'At this r a t e we shall be wiped out,' and
stops b u y i n g ; j u s t a t this time the announcement of a public-works reserve m a y
encourage new buying all along the line, for new consumer purchasing power
is sure to follow. A million dollars started in circulation a t such a time is
worth probably ten millions. Every man reemployed pays up his bills, let us
say, to the grocer, who is a little freer and buys not so closely as before.
Every contractor who gets orders and can place them directly wTith the mill
makes it possible for t h e mill to do and to dare w h a t it could not do with t h e
whole business world as tight as it gets during a depression."
So public work need not employ all the unemployed but only a few in order
to lay the foundation for the u p w a r d movement. Beginning farther back in the
business cycle, if the peak of the boom is kept from soaring, the fall will not be
as low as level.
Economics now throws light on the process from a different angle. We were
always told to be cheerful to-day if we would be cheerful to-morrow. Now,
we h e a r t h a t " We can be pros'perous to-day only by preparing to be prosperous
to-morrow." Increase credit when purchasing power is low and use the credit
t o build works t h a t will not produce more consumers' goods, for t h e m a r k e t s
a r e then already glutted with goods the consumer can not buy. Don't build
more factories to make more. P a y out wages t h a t can be spent only for goods
t h a t have been or will be produced by the old facilities. Public works, for
instance, create nothing immediately saleable to the wage earner. A road, a
public building, are not consumers' goods. So the trick is to keep the supply
of credit large enough to enable the buyer to t a k e away all the consumers'
goods produced. Especially is this necessary when prosperity is slipping. T h u s
preparation for the future is the foundation of the present. The prosperity
reserve, however, does not depend upon all the implications of this credit
theory, but gains additional support from it.
Meanwhile, how big a fellow is this public-works chap? Are we sending a
boy to do a man's work? The income of t h e United States as a going concern
is about $90,000,000,000. A 10 per cent industrial depression would be a drop
in our national overturn of nine billions. All construction is about seven
billions. Public works is about one-quarter to one-third of all construction.
If public works were doubled in a year of depression the increase would
therefore fill one-fifth to one-fourth of the hole made by a 10 per cent industrial
depression. So even according to a purely mechanical theory of the business
cycle, now out of date, public works a r e an important factor. Such a ratio of
increase is possible* for it was achieved in 1921 under the leadership of t h e
President's conference on unemployment, when sales of municipal bonds for
public works doubled.
Would a prosperity reserve diminish a so-called technological unemployment—
the displacement of workers by labor-saving machinery and more efficient management? This is supposed to be the p r i m a r y cause for the drop of 600,0-00
persons from factory pay rolls since 1920. Agriculture is getting along with
650,000 less persons, and mining with 100,000 less. On the other hand, during
t h e same period there have been large increases in t h e numbers employed in
transportation and communication (902,000), domestic and personal service
(761,000), distribution (691,000). T h e prosperity reserve would not arrest
technological unemployment or the shift to new occupations, but might tide
people over temporarily while seeking adjustment. For instance, in a i y e a r of
rapidly decreasing factory employment for technological reasons the release
of t h e reserve would increase employment directly in cement, steel, transportation, retail distribution, etc., and indirectly by the amount of its general
purchasing power exerted upon all commodities and services. I t would be a
temporary refuge in the middle of the street until the traffic signal shows green
for general employment. A displaced factory worker might get one of the
jobs created by the reserve, for instance, as truck driver, while he makes
his adjustment to, let us say, radio aerial fixer.
The prosperity reserve principal has for y e a r s been supported by such bodies
as the Philadelphia and Seattle Chambers of Commerce, by resolutions of the



American Federation of Labor, by party platforms, and by its active proponents,
the American Engineering Council, the Associated General Contractors of
America, the American Association for Labor Legislation. Since the conference
of unemployment of 1921 Secretary of Commerce Hoover has never failed to
lend a helping hand. At his request Governor Brewster, of Maine, urged upon
the conference of governors in Louisiana the formation of a construction reserve
by each State.
Without the States and cities the Federal Government is powerless to
stabilize, for their combined volume of public works is ten times as great
as that of the Federal Government. Lacking a definite policy or control, they
can overbalance any sound position the Federal Government may take. The
States, for instance, control the timing of the national road-building program.
Although the Federal Government gives them aid of about dollar for dollar
on major highways, each State decides whether it will take its share in
equal amounts each year, or more some years than others.
For the cities the long term city plan is an anchor to windward. It holds
well-laid plans which can be quickly used when a depression arrives—plans
that will avoid choosing a makeshift and wasteful project. A depression may
be used as a good lever to push over basic improvements long delayed and
badly needed.
Cash reserves by cites and States are not desirable. Credit reserves are
better because they release credits in bad times when they are a tonic to
trade. If on the contrary large municipal bond sales are made in boom times,
instead of a tonic they are a heavy pastry piled in on top of an already gluttonous gorge of private credit, and may be the final precipitant of economic
illness. What commonly happens is that a city exhausts its borrowing power
during boom times and has little credit reserve when bad times come.
Secretary of Commerce Hoover in 1923 undertook to avert a building boom
and the depression inevitably to follow. He sent a public letter to President
Harding suggesting in view of the great activity in private construction that
as little public work as possible be undertaken. Federal public work was
already at an agreed minimum. Its apparent intention was to warn the
building industry and prospective builders that the pot was already seething
to overflowing. The effect of the letter was the postponement of large amounts
of private construction. The halt in the rise in volume of municipal bond
sales for public work which occured at the same time was probably not due
to this warning, for municipal authorities generally are not yet aware of
their responsibilities as part of the Nation's economic defense reserve. However, in this instance private construction alone was able to accomplish much.
Private building operators who postponed work until 1924, a year of business
recession, first avoided adding to the high peak of 1923 and then filled in
the depression of 1924, thus stabilizing at both ends the building industry, its
27 tributary industries and the general economic situation.
This is a happy example of the principle embodied in the Jones bill, of exciting far wider consequences that can be detected in the text of any law. The
prosperity reserve had become general prosperity insurance. The public was
unaware that trouble had been averted. Why then have any legislation if
the act of a public official may have such results? Because it is unsafe to
depend upon the whim or the economic education of successive Federal
officials. Also Congress has, and ought to have, a say in any appropriation
policy and the whole subject should be aired and fought out there. Federal
legislation should give in advance a national signal that all can move synchronically. As a traffic signal, a go-ahead order, the Jones bill is a big
step forward.
With such an example as the doubling of public wTorks bonds sales in 1921
why has not greater progress been made? Why is it that after 10 years of
effort, when 1927 unemployment was almost half as great as in 1921, no
special effort can be reported by New York, Chicago, Philadelphia, Detroit,
Boston, San Francisco? How is it that Wisconsin, though willing, found
itself without quickly available funds? Why is it that California, with an
emergency public works commission, made no use of it? Prof. F. G. Dickinson, of the University of Illinois, reports these facts and that in general in
the first half of 1928, in spite of many attempts to persuade public officials,
there was no appreciable result. New York State responded to the request of
Governor Smith and increased its hard-road contracts from $19,000,000 in the
first half of 1927 to $26,300,000 in the corresponding period of 1928. Contracts of public buildings in New York State, not so subject to quick changes,



fell off from 11% millions to 8 millions. The result was that even in New
York State, where an energetic and convinced attempt was suddenly made r
the net increase was on!jT 8 per cent, or less than the average 10 per cent
increase of the whole country for the same period, which can not be attributed
to this policy.
The year 1928 was not a year of depression, yet the experience of New
York State is proof11 that a public-works program can not be suddenly improvised except under exceptional conditions. A fire department must be formed
before the fire breaks out. A prosperity reserve must be created in advance,
as the Jones and Wagner bills provide. The experience of Philadelphia is a case
in point. An influential chamber of commerce committee wanted public work
advanced early in 1928. A large bond issue was to be voted on by the people in
60 days, yet all efforts failed to find a short cut to begin work before the
vote. In years of employment councilmanic leaders had occasionally found legal
ways of doing this, but unemployment was not a strong enough motive to overcome the inertia inherent in government.
This reveals the weakest point of the prosperity reserve. It will not get
votes. City officials are not dependent upon long-term results for holding
their jobs as business executives are. A prosperity reserve may make more
secure the jobs of citizens but no tof the official, whose successor may reap the?,
political advantage. Spending public money is good politics at one time;
economy is better at others. These times may not coincide with the need
to stabilize employment. Consequently we can not expect all public officials
to dive into the prosperity reserve like boys into the old swimming hole. They
will have to be pushed gradually into it by the pressure of business and
banking opinion. Bankers, by nature and habit, take a long view of affairs.
A sound banker plans in order that his bank and his companies may not lose
next year what they made this year. Stability is his middle name. The technique of working out the prosperity reserve is a challenge to good banking
Federal leadership is needed. Hundreds of isolated banks used to be helpless
in panics before the Federal Reserve Board was created. Every panic was
a proof that a central reserve was needed, yet it required a dozen panics and
several generations to achieve this essential reform. The prosperity reserve is.
no different, only simpler. Perhaps it has too many polite friends. If opponents would call its advocates horse thieves and Bolshevists it might speed up
The goal is worth while. Leadership and devoted followers are needed. Mississippi floods and epidemics have not brought more misery and destruction in
their wake than have periods of unemployment. The dark specter of joblessness stalks before a million homes. The fear of it is imbedded in the subconscious mind, and this fear explains conduct otherwise inexplicable. Every
depression is a strain on our institution and our system. American business
should never again wait for the referee's count of nine before struggling to
its feet. The time of prosperity is the time for preparation.

(Thereupon, at 11 o'clock a. m., the committee adjourned subject.
to the call of the chairman.)



Washington, D. C.
The subcommittee met, pursuant to the call of the chairman, in
room 335, Senate Office Building, at 10.30 o'clock a. m., Senator
James Couzens, presiding.
Present: Senator Couzens (chairman).
The CHAIRMAN. Mr. Leeds, will you please state your business and
your place of residence.
Mr. LEEDS. The business is Leeds & Northrup Co., Philadelphia.
The CHAIRMAN. Tell us what the business of your corporation is?
Mr. LEEDS. The manufacture of electrical measuring apparatus,
and temperature-measuring instruments, and its field in the use of
those instruments is chiefly in the precise measurements in industry,
where industry wants to get an exact control of its temperatures, and
for electrical quantities, and so forth; somewhat also in the line of
chemistry, and somewhat also in the control of combustion. Also,
we make some furnaces for heat treatment of steel.
The CHAIRMAN. YOU understand the purpose of this meeting?
Mr. LEEDS. Yes. I have gone over your bill, and I have read your
letters and inquiries.
The CHAIRMAN. Tejl us in your own way your experience and what
you might suggest as to aid in the stabilization of employment.
Mr. LEEDS. T O get back to the matter of experience, I was convinced
a good many years ago of the element of unfairness and social wrong
that modern industry had gotten into of freely hiring people and
with equal freedom firing them. I do not need to go into all that.
I presume that is the sort of thing that has brought this subject to
the attention of your committee. I have read with interest the
wriings of Eoundtree and of Abbe, a man who became a prominent
industrialist, who himself rose from the ranks of labor, and saw
Germany evolve through the whole stage from hand-to-hand crafts
up to the modern organization of industry, and so in his own industry
he said that he thought that all of the advantages it had were more
than offset by its disadvantages, unless they could be controlled. One
of the conspicuous disadvantages was the upset that is made in family
pjans and the deterioration of moral fiber, and so forth. The absolutely arbitrary and careless way in which industry would sud-




denly say to a group of people who had been brought to a locality
ancl established their homes, " I don't want you any more," seems
a great wrong. I n 1921 we felt that we had to lay off some people,
and I took an opportunity at that time to talk with a good many of
them about what it meant to them, and I found out just how it did
interfere with plans for educating children, establishing homes, and
even in the somewhat lower ranks more serious influences than those,,
near to subsistence, and I then decided that as soon as we were in a
position to do so we would make some provision against having to
go through that experience again.
The CHAIRMAN. May I interrupt you there? You said, " W h e n
you were in a position to do so." W h a t kind of a position do you
Mr. LEEDS. Financial.
The CHAIRMAN. Then you recognize that perhaps there are some
industries that are not substantially able to do anything in this connection.
Mr. LEEDS. I should not suppose there is any doubt about that—
that is, under certain circumstances they would not be able to do anything about it. If we had had enough experience and had thought
about the matter enough before, perhaps we could have made provisions for it at that time, but at that particular time we were in the
same position as some other people, carrying bigger inventories than
we should, and borrowing more money than we would like to, and
not knowing when the turn was coming. As a matter of fact, it came
sooner than we expected, and we did not really need to have laid off
the people we did. But we could not tell that.
The CHAIRMAN. The reason I asked that question is because some
of the testimony and some of the correspondence we have had with
industrial leaders indicates that it is not only money that is necessary to solve this problem but perhaps more frequently it is a matter
of judgment and brains in the management of the industries, and the
arousing of the conscience of the employer to do something to regulate the output throughout the year so as to stabilize employment.
I did not mean to infer that money alone was the solution of the
problem. Sometimes those who are forced by economic conditions
to use judgment and talent do it best without money.
Mr. LEEDS. Yes. We had not squarly faced these problems before
that for ourselves, and when we did come to it money was the primary
consideration with us, just at that time. W h a t we did about t h a t
time was to study our history, as near as we could get at it from
our records of unemployment, and we found that it was exceedingly
difficult to interpret it accurately. We could tell how many people
we had and it would show rises and falls in employment, but after
a few years had gone by it was possible to see why those things had
happened; nobody could remember in some cases and we knew they
were not due to lack of work, but we made the best case we could
out of that history as to the amount of money that we would need
to set aside in order to give a separation wage that would fairly tide
people over in case we had to lay them off, and we concluded that if
we accumulated a fund that was equal to twice the largest pay roll
of the previous 12 months, we would then be enabled to meet any situation that was likely to occur in our particular business. T h a t is
rather larger than it looks, because when we say the largest pay roll



we mean the whole pay roll, officers' salaries and everything else,
and we have only made the unemployment fund apply to those who
get $2,600 a year or less, so that it is more than twice the pay roll
that applies to that particular group of people. We decided to set
that fund aside at the rate of 2 per cent of every pay roll until it
had come up to that amount, and that we have done since. Business
has been expanding, and the amount required has increased from
time to time. On a number of occasions it has been necessary to put
up a further amount to give us further increases, but I think it is now
fully paid up, and is about $55,000, our business not being a large one.
The CHAIRMAN. Did you add that to the cost of production ?
Mr. LEEDS. Yes. We have set that fund aside in a trust company,
not to be at the hazards of the business, nor is it recapturable
under any circumstances by the business. The trust is so worded
that in case we should go out of business, or in case State provision or
anything of that kind should come in and make the fund unnecessary it Avould then have to be used by the trustees for some similar
purpose. I t can never go back to our business, and under those circumstances we bookkeep it as to cost of production.
The CHAIRMAN. That, of course, is deducted as business expense
from the income tax?
Mr. LEEDS. I t has been deducted regularly and has been passed by
the tax collector.
The CHAIRMAN. I remember in the Finance Committee that we
had some of these trusts to deal with in passing the law. Did you
find that this practice that you adopted made the men more efficient, that it was a good business proposition in addition to being
a humanitarian move ?
Mr. LEEDS. We believe it is. We have a series of provisions that
are intended to work that way. We have a representative council
of employees which passes on a great many things, and with which
we coperate in a thorough going way. We have vacations with pay
to a considerable extent, and also old-age pensions; but it would be
very difficult to disentangle anyone of those features from any other
and say what the effect is; but we do enjoy a very satisfactory relationship with our employees and have an organization that in a
very whole-hearted way rises to whatever emergency we put up to
The CHAIRMAN. H O W many employees have you ?
Mr. LEEDS. Eight hundred.
The CHAIRMAN. D O you think a plan such as that could be worked
out in large industries, where there are 25,000 to 100,000 employees ?
Mr. LEEDS. I don't see why the size of the industry would have
anything to do with it. I t would have the same percentage relation
to their costs, and from what one sees of the profit reports of these
large industries it seems to me that it would not be a serious burden
upon many of them.
The CHAIRMAN. W h a t I have in mind is the lack of contact that
exists between the management of large industries and their employees. That, I think, is the main factor in creating some discontent in industry, because the top is so far removed from the bottom
that they do not get into immediate contact as they do in smaller
enterprises. I conclude that from the many years' experience I had




when the industry with which I was associated was smaller. We then
had opportunity to observe the human effect more so than we did
when the industry got so large that we could not see all the way down
the line.
Mr. LEEDS. Don't you think that was due to your rapid growth,
the great rapidity with which you had to change from a small to a
large industry; that if it had gone on slowly that the means by
which those things could be accomplished could have been added?
I was thinking of the 6,000 employees of the Carl Zeiss Warehouse
in Germany. They grew rapidly, not like your company, but they
preserved the instrumentalities through which those contracts were
made and the social ideal was preserved.
The CHAIRMAN. I think that is correct; but what I had in mind
was the attempt now to put into execution some of these very desirable plans for the creation of contentment among workers. For example, take the Steel Corporation. To now arouse their interest
sufficiently to do the things that you are doing would perhaps be more
difficult than in the case of a smaller enterprise, where the management was much closer to its workers.
Mr. LEEDS. Oh, it would unquestionably be more difficult.
The CHAIRMAN. That is the point that I was making.
Mr. LEEDS. Take the economic provision to take care of unemployment. I can not see that that is a question of size. I t is a
question of profits that the company makes, and whether it is in a
position to set aside something for that purpose, and also how great
a hazard it is for the company, whether it is one in which employment is fluctuating largely, whether it is fairly stable, and in the
latter case the hazard is much smaller.
The CHAIRMAN. I was thinking of ways and means of arousing
their interest in doing the things necessary to do, of arousing the
interest of the management of these big institutions. I t is more difficult to arouse their interest because they are so far removed from
actual conditions that exist. However, I will be glad to have you
proceed. I did not mean to interrupt you except that I wanted to
get the psychology of what inspired captains of industry and employers to do the things that obviously ought to be done.
Mr. LEEDS. YOU asked in your letter about our history. I t is
hardly yet significant. We established the fund in 1923, started it
then, and have had a continual period of stable growth, and no
period of decline since that time, with the result that we have had
no occasion to lay anyone off for lack of work. We have laid off a
few people by reason of readjustments, and a few by reason of the
fact that we did not consider them satisfactory work people, but
that amounted to only five, and the amount that we have paid out
of this fund has been only $500, so that it is not significant as yet.
We have to go through a bump of unemployment before it will become significant.
The CHAIRMAN. When this period, this bump of unemployment
you speak of, comes about, you will use this $55,000 fund for the
purpose of distributing it among those who are laid off, and in what
amounts will you do that ?
Mr. LEEDS. The rules under which that fund is to be distributed
were made up by a joint committee of our work people and the man



agement, in which the working people had a majority, and in which
as a matter of fact we simply accepted what they proposed, which
was that married people, men with the responsibility of a family,
should receive 75 per cent of their wages for periods which depended on the length of time they had been with us, and unmarried
people 50 per cent of their wages for periods which depend also upon
the length of time that they had been with us. I can give you the
range of those.
The CHAIRMAN. May I ask at this point just why you regulate
that on the basis of the time they had been with you? Aren't their
economic needs the same whether they have been with you a long or
a short time?
Mr. LEEDS. Yes; their economic needs are the same. I t was due
I think to a feeling that our responsibility was not the same. That
may not be justified, but we felt that we had a greater responsibility
for instance to a man who had been there a long time than to a man
who was there only a short time. The man who had been with us
for only three months would not have done very much to get settled in his way of doing things, and if we gave him three weeks
compensation, which is the amount that goes with three months,
three-quarters of what he has been getting, assuming that he had a
family, that that would fairly represent our obligation to help him
relocate himself, and that that obligation would be increased with
the length of service that he had with us, and does go up to 26
weeks of compensation for those who have been with us for five
years or more.
The CHAIRMAN. That is, that you are responsible for those 26
weeks they are off?
Mr. LEEDS. I should say that the assumption that lies behind that
is that when we employ a man, it is with the expectation that we are
going to have a permanent relation, that this is his permanent industrial home if he wants it to be. By reason of our failure to carry
out that implied contract, we compensate him for our failure, and
that the amount of compensation that we owe him for that failure
increases with the length of time that he has been with us, which
increases the expectancy on his part that it is a permanent industrial home for him.
The CHAIRMAN. If a man has been with you for three- months
and you lay him off for lack of work, assuming that he is to remain
off for three months, you pay him for only three weeks. Is that
the idea ?
Mr. LEEDS. We will only pay him for three weeks, assuming that
he does not get some other job within the three weeks, in which case
our payment ceases, and what happens to him after that is out of
the picture.
The CHAIRMAN. Proceed.
Mr. LEEDS. These schedules are not payments that are paid under
any circumstances, but only in case the person does not find other
work. The whole idea is to take care of him during the time when
he does not find other work. When he finds other stable work the
obligation ceases. Of course, that introduces the problem of who is
going to decide whether he has got other work, but we put that into
the hands of our employees. This is their fund to compensate them,



and the compensation will not last any longer than the fund does.
That is, we have assumed no obligation beyond the fund and we
believe that they would be the best people to keep back of the man
to see that he does not draw on the fund and work both, under a
regular system of reporting.
The CHAIRMAN. Does this plan, wThich I have not had an opportunity of reading, carry with it any compensation during illness?
Mr. LEEDS. We have that separately. This is an unemployment
fund and it is not tied up with other things. The sick relief is
separately taken care of, and the old-age pension and death benefits
are taken care of by a separate fund and in a separate way.
The CHAIRMAN. And they have nothing to do with this $55,000
Mr. LEEDS. No. You asked whether it had any influence on
stabilizing our employment. Aside from the fact that we have
definitely tried to accumulate some money reserves with which to
keep on and build up or do other things in case we should have a
time of slack orders, we have not faced that situation. I t has created
in our management a state of mind that, having accumulated that
fund, we do not intend to spend it if we can possibly help it. We
intend to do the other thing and keep them regularly employed.
The CHAIRMAN. W h a t you mean to imply is that you have had
no real test?
Mi". LEEDS. NO ; we have had no real test.
The CHAIRMAN. SO in case of a great depression in business, you
don't know what your experience might be?
Mr. LEEDS. N O ; but I think it is fairly obvious that any management which had set aside a fund for that purpose and faces the fact
that if they spend it they would have to set aside that amount again,
would try to conduct their enterprise in such a way so as not to
spend it, even if it is only a matter of pride.
The CHAIRMAN. That is the trend of the testimony that we have
had up to date, that if there was a penalty for bad management, or
for laying off of people through perhaps bad or careless management, that they are more apt to regulate their business well. That
is your experience, or at least that is your attitude of mind ?
Mr. LEEDS. Yes; that is our attitude of mind, but not our experience as yet.
The CHAIRMAN. Have you ever contemplated that employees
should contribute anything toward this fund?
Mr. LEEDS. No. I t has always seemed to me that this is a reasonable responsibility of industry, and that it should be passed on to
society as a whole, if necessary, in the extra cost of the product.
The CHAIRMAN. I n your old-age pension, or in your sick benefit,
do you require contribution from the employees?
Mr. LEEDS. I n the old-age pension we have a combination of the
two. That is, we do a certain amount regardless of whether they
come along or not. If they go along, we double the amount, so that
it practically means that they get out of it about three times as much
as they contribute, as our original contribution.
The CHAIRMAN. What do you do in case of illness?
Mr. LEEDS. Illness has been entirely taken care of in our organization by a voluntary organization of the employees, and we have



kept watch of it. They meet the situation entirely adequately.
They have regular contributions. They keep enough money in tlieir
fund to meet emergencies, and now and then even to use it as a loan
fund to people needing money to help over emergencies.
The CHAIRMAN. The company does not contribute?
Mr. LEEDS. N O ; it never has. The only time that the company did
was in the flu epidemic some years ago, when they were faced with
extraordinary demands, and when we would have been glad to make
an outright contribution, but all they asked us to do was to loan
them some money, and they managed their affairs so well that they
paid back the loan in nine months, so you see that they have a considerable capability of taking care of themselves.
The CHAIEMAN. Have you had any experience with industry
through the laying off of employees through improved machinery or
equipment ?
Mr. LEEDS. I t has not come in our case. A few of these five cases
have been that sort of thing, but for the most part when we have
done anything of that kind, we have been able to take care of the
people elsewhere in our plant.
The CHAIRMAN. Have you anything else that you can volunteer ?
Mr. LEEDS. Yes; there is another phase of the question that I would
like to bring before you, and that is from another angle. The industrial relations committee of the Chamber of Commerce of Philadelphia has been devoting itself this winter to this subject of unemployment, and there has been a lot of meetings about what might
possibly be done by stimulating industry, this, that, and the other
way, but we have not gotten very far. Unemployment is with us
just the same as it has been, and I am the chairman of the subcommittee to report a plan by which we can determine how much unemployment we have and what it is due to, and we are absolutely up
against it. We have met and talked with people, and so forth, but
wre can not think of any way of finding out about that. What I
would like to say to your committee perhaps more emphatically than
anything else is that if you can help us to measure unemployment,
how much there is of it, and what it is due to, it will give us a great
deal of help. We don't know how to find out how much unemployment there is in Philadelphia.
We have tried organizations, and in the metal industries, and in
certain textiles we can pretty easily say that in 1927 there were so
many people employed, and that in 1928 there were so many people
employed and then we can measure the difference if there were less
in 1928 than in 1927, but everybody knows that that does not tell
you how many are unemployed, and it is subject to serious errors.
I n the first place, there is the error that you are always likely to
make when you count 100,000 and then count 98,000 and say that
there are 2,000 less. If you make a slight error in either the 100,000
or the 98,000 you make a big error in the difference, and on top of
that it is subject to the much greater error that you don't know that
those 2,000 people are unemployed simply because they don't happen
to be employed in that particular industry at that time. And working as our friends of the Wharton School of the University of Pennsylvania, with their expert advice, and people that we have been
able so far to call in, we were absolutely at a loss to report back
to our committee what we consider might under the present circum



stances be a good method of rinding out how many people are
unemployed and of continually keeping that record.
The CHAIRMAN. May I say, not to make a point of discrediting
the value of statistics, it seems to> me there has always been an overemphasis upon the question of statistics as applied to unemployment.
Just what would the difference be in Philadelphia if you had more
statistics and you found that in one case you had 5,000 unemployed
and a few months later 8,000 unemployed ? Tell us what you would
do about that.
Mr. LEEDS. I think that would come out of it, and I think the
importance of the statistics in that case is that we are now all the
time being told that it is not as bad as we think it is, and that this,
that, and the other big industry is going to build a lot of buildings
or do something else, and, therefore, that the situation can not be
really very bad. I think that if it could be pointed out to the industrialists who can be drawn into such a conference where it is so
and so actually, and with that is this fraction of their total labor
bill, and that associated with that small fraction of their total labor
bill they are bringing in an enormous amount of hardship to that
particular group of people, together with great discontent, and a
fertile seed bed for radical thought, that you would have a much
better way of influencing them to do something about it, whatever
that may be, more than you will when you just talk about it in vague r
general terms.
The CHAIRMAN. SO that it is largely the psychological that we
would get out of these statistics ?
Mr. LEEDS. Yes. I think it would be the first step to doing something.
The CHAIRMAN. Have you anything else to suggest ?
Mr. LEEDS. I think not, thank you.
The CHAIRMAN. Doctor Commons, are you still connected with the
University of Wisconsin?
Doctor COMMONS. Yes; I have been there for 25 years.
The CHAIRMAN. Doctor, we will be glad to have you tell us in
your own way what we are trying to arrive at. You have seen a
copy of the resolution, and the purpose of the committee's investigation.
Doctor COMMONS. Mr. Chairman, I have brought with me, but did
not bring down to the Capitol to-day, some exhibits, but I can sketch
to you the outline of how it came about that in Wisconsin the legislature considered during three successive sessions what we called, after
the name of the introducer of the bill, the Huber unemployment
prevention bill. I was associated with the drafting of that bill.
At one time we had a majority in the Senate, but amendments were
tacked on which made it distasteful and so it failed. Then in the
Chicago men's clothing market there was adopted in 1923 a system
of unemployment insurance, practically identical with this proposed
in the Huber unemployment prevention bill. I was chairman of that
organization, covering about 30,000 employees, and the entire men's
clothing industry. During the installation period from 1923 to 1925 r
I was the chairman of that organization.



The two systems, one by a legislation represented in the Huber bill
and one by joint agreement between the manufacturers of men's
clothing and their organized employees, worked out substantially on
the same principle, and they are entirely different from any European
or foreign system of unemployment insurance. I find that that is a
very difficult thing to explain. People who have criticized unemployment insurance and even criticized our measures! in Wisconsin and
Chicago seem to have in mind solely the European system, which I
would call paternalistic and socialistic. Ours is a purely individualistic system, and in order to explain that difference I think, if you
will allow me, I shall sketch here the way in which this unemployment
idea started in Europe and the way in which it came to this country
and indicate something of what appeals to me to be the philosophy
back of it, the theory.
I t started about 1895 in one of the Swiss cantons, St. Gall, and
that canton imposed a premium to be paid—it amounted to a poll
tax—by all of the wage earners of the canton, which was to go into
a fund to be administered by what we would call the State—it was
no larger than a county—and then to be distributed to the unemployed under certain rules laic1 down. This was the first attempt.
The consequence of it was, on account of this poll tax, that the class
of labor which they wanted to keep in the canton began to migrate to
other places. I t was a tax on being in that canton. Furthermore,
they could not collect from the wage earners.
The expense of collecting a poll tax from the wage earner, a
monthly poll tax—I can not give any exact figures—was something
greater than the amount that they would get out of it, so that the
canton in enforcing it found that it was getting nowhere, and it was
repealed at the end of a couple of years. By driving labor from the
canton and by the enormous expense comparative to the benefit to
be obtained it was found necessary to repeal it. The next step was in
Belgium, in the city of Ghent, about 30 or 35 years ago. There was
developed there what wTas knowTn as the Ghent system, and it spread
from the city of Ghent to the several States of Belgium and Denmark
and Holland and to a certain extent there has been adopted in the
other Scandavanian countries, Norway and Sweden, and it is of
this character. Take the city of Ghent, and what I say here will
apply later to Denmark and the other States. The town council of
Ghent proposed or offered to any association of wage earners to
duplicate any amount they might .set up voluntarily as an unemployment insurance fund, simply subsidized them, giving it to them from
the city treasury; and now it is the combination of the city and theProvince and the State governments in those countries. They gave
to them a subsidy to be administered by themselves equal to what
they may voluntarily contribute. I t turned out in the administration of that fund in Ghent and as they spread out over into Denmark
and the other countries that the only associations which could take
advantage of that offer were trade-unions, organized labor, and
organized labor is a large proportion of the labor in those countries,
much larger than it is in this country; but mutual associations for
insurance purposes, other than those built upon existing labor unions,
were unable to organize for the purpose.



Doctor COMMONS. There was nobody to take the lead in forming
an insurance association, and they are miscellaneous, unorganized,
and you would have to hunt all over the towTn to find them. The
unions came in and seized upon the opportunity, and that is what
they have done in Denmark and the other places. They practically
preempted the field. I am not positive whether or not there were any
mutuals, other than trade-unions that accepted these provisions. I
am quite certain that there were not others. At any rate, this is
what happened, and this is the difficulty I want to get at. W h a t this
amounted to, then, was the city or the State subsidizing the tradeunions, in case of unemployment, and leaving the administration
solely to the unions to distribute the benefits, and it was not very
long before the employers began to see that it was being used for
industrial conflict purposes, enabling them to stay off work, not striking ; but the unions having another system of not going out together
on a strike, but having a sort of individual vacation. Each person
would take a vacation, and the union might furnish him unemployment benefits. So we have now the State and the unions cooperating
and the employers and the manufacturers are raising a protest.
The amendments to those laws in those States I could go into
more detail about if I had the statutes before me. I have them in
my room at the hotel; but the substance of it is this, that the manufacturers demanded and ultimately obtained this provision; that the
State should set up itself an administrative office, which should determine and pass upon the benefits awarded to any particular individual,
after seeing whether that individual was within the definition of
involuntary unemployment, due to lack of work and not owing to
any other cause, discharge or inefficiency or anything of that kind,
to which they endeavored to limit it. These States, therefore, modified their laws, but have not repealed them. They have grown by
increasing the State's responsibility for administration, but the employers do not contribute.
England made the next advance.
The CHAIRMAN. YOU say that the employers do not contribute.
You mean that they do not contribute directly, except through taxes?
Doctor COMMONS. Yes. Those subject to the taxing powers we
call the consumers. The industries as such do not contribute. I n
England, as I say, the next step was made, which included the employers, the State and the employees, paying the premium equally,
one-third by the employees, one-third by the employers, the State
paying part of the benefits, but carrying the expense of administration, so that in counting the expense of the administration with the
supplementary benefits which the Government affords, the State
would be paying one-third.
The employers pay one-third and the State one-third and the
employees one-third, and then they have certain rules for deciding
the class. I shall speak of those rules later. Those systems I call
insurance systems. They are insurance in this sense: That the
premiums collected on the labor or on the State are based upon the
number of weeks that they are employed. Suppose we had two
manufacturers, one who works full time and who furnishes 52 weeks
of employment, and a competitor of his who furnishes, say, 26 weeks,
to take a clear-cut case. The employer who has 52 weeks pays 52
premiums, and the employee pays 52 premiums, and the State. The



one who has 26 weeks, pays 26 premiums, and the State pays 26, and
the employees pay 26 premiums, and this all goes into a common
State fund. When the benefits are paid out, the employees of this
employer, who has 52 weeks, get no benefit, because that employer
has stabilized his work. The funds, however, which he pays in are
transferred automatically by the fund system, which you call the
insurance principle, as against the other principle, and are paid
over and given to 13 weeks of benefit to the employees of his competitor during such period as he has not been able to furnish them
steady employment. What it means then is what we call the socialistic or paternalistic system, taxing those who are successful in
providing stable employment and making money by doing it, and
turning their money over for the benefit of other employers and
their employees who are less successful, interpreting "success" as
the ability to work continuously and to make a profit continuously.
What is the theory back of that? The theory back of it all is
the relief theory. I t is a development of the philanthropic idea,
arid also a development of the application of the idea that the
causes of unemployment are inscrutible, that they proceed like the
forces of nature. Economists have their theories of what causes
the ups and downs of business. They have even attributed it to
the sun spots, and the transits of Venus, and to rainfall, and what
we may say are acts of God.
That is the European theory, that here is something that industry
can not control, that is a natural phenomena, and so we have to
employ the taxing power, taxing people according to their ability
and success to pay, to pay a relief to the unfortunate and to help out
the inefficient.
The CHAIRMAN. Have you any views about that ?
Doctor COMMONS. I am going to tell practically what I prefer to
call the American system, the individualistic system.
The CHAIRMAN. And in that manner you will be able to express
your views?
Doctor COMMONS. Yes. The Huber bill and, likewise, the system in the Chicago clothing market, are based on an entirely different view, and that is that there shall be no fund, no joint or mutual
fund, under administration of any State or organization, held by
the State and distributed as in England, or any fund which should
be distributed in the way of the European method, but rather, that
the employers should set up what in the Chicago market we call
establishment funds as distinct from a market fund.
Here comes in a very interesting difference between the psychology of employers and employees on this subject, and one that must
be taken into account in developing any system of unemployment
prevention. The working people, the trade-unions, the working
people generally, are burdened with the idea of unemployment.
They don't care where the money comes from. They want a fund
that will relieve them and their suffering, and they do not want to
depend upon the success of an employer in building up these funds.
They want to have some provision for benefits, so their idea of an
insurance fund is the European idea, and which we call in Chicago
the market fund principle. While the matter was under discussion in Chicago, trying to reach an agreement, the two issues were



upon that basis. The Amalgamated Workers' Union stood for the
market fund.
The CHAIRMAN. I don't get the point of what that means.
Doctor COMMONS. The employers insisted on an establishment
The CHAIRMAN. That is, confined to their particular factory ?
Doctor COMMONS. Yes. Take Hart, Sehafner & Marx, with four
or five thousand employees. They would have their own insurance
fund, which would benefit only their own employees. Another concern would have a similar fund, and all of the 70 different firms
would establish TO different funds in the Chicago market, and they
should be responsible only for their own employees.
The CHAIRMAN. That is what you designate the establishment
Doctor COMMONS. Yes; similar to the Leeds's fund. His is an
establishment fund. H e does not pay into a market, and then by
some system of rules it is paid out to all of the employees. The
unions, of course, wanted the market fund, and that is what we
call the difference between an insurance plan—it is a market plan
under the terminology that we worked out in Chicago—and an
establishment unemployment reserve fund. That is the thing that
is characteristic of this Huber bill. Each establishment has its own
fund. The wTay in which that idea first came about is simply this:
The experience of the workmen's accident compensation in Wisconsin brought it about. When that law was enacted in 1911 it was
provided that a right of action was practically created by law against
the employer in case of accident, and terms were defined, and so on,
and an administrative body was set up to listen to appeals in cases
of suits, and so on. I t also provided what they called three systems
of insurance. One was self-insurance. An establishment which
showed that it was financially solvent could set up its own insurance fund and carry on its own insurance. I t really was a reserve
fund, and we have in Wisconsin about 250 self-insurers, so called.
Then another plan, which is permissible under the law, was mutual
insurance. Employers might set up mutual insurance companies for
the writing of insurance against this accident compensation. Two
or three insurance mutuals have been set up, and one has grown so
extensively that, according to the last figures I had, it covers about
40 per cent of all of the insurance that is written in the States, apart
from self-insurers.
The CHAIRMAN. YOU are speaking of industrial accident insurance
when you speak about the 40 per cent ?
Doctor COMMONS. Yes. Then the other provision is that an employer may take out an insurance in an old line company, a stock
company. So there are three methods. I was a member of the
industrial commission that put that law into effect for two years. I
assisted in drafting the law. We stood out against the State fund,
but wanted to have the employers have two ways of administering
it. We did not like the idea of their insuring in stock companies,
because that unloads the burden on somebody else, but we wanted
the employers to adopt self-insurance or mutual insurance.
The result of it has been that the greatest progress made in Wisconsin toward a reduction of accident, a prevention of accident, has
been made by these self-insurers. These 250 people were the pioneers



in all activities for the reduction of accident. Classed with that is
this employers' mutual, which writes 40 per cent. That employers'
mutual insurance has a staff of safety experts, who go all over the
State, and they put in a campaign of accident prevention. My idea
is that they did much better than through the industrial commission.
They took our best men away from us, and made them their own
inspectors. That of course is just what the State wants—the employers to do their own safety inspection work. I t is the much
better way. Our State commission was just a sort of training school,
an apprenticeship school, for safety experts, to be taken over by the
manufacturers of the State. I t is putting it up to the employers
themselves to reduce accident compensation by the prevention of
accident. If the responsibility comes home directly to each establishment, we can have better results. We have had wonderful cooperation with the employers in reducing accidents.
The CHAIRMAN. And out of all that came your insurance principle ?
Doctor COMMONS. Yes. Why could not that same principle be
applied to unemployment? Why could not the employer be made
responsible for stable employment by creating against the employer
the right of action on the part of the employees for compensation
for a certain period of time in case he was laid off solely on account
of lack of work ?
The CHAIRMAN. D O you believe that that could be done under the
constitution of any State or of the Nation ?
Doctor COMMONS. I have found by studying decisions of the Supreme Court that the Constitution of the United States is quite
elastic if you will give it time. The Supreme Court is ordinarily
about 15 years behind the times. I t has a lag of about 15 years, as
I have tested it out; so while I think at first it would be unconstitutional, yet in the course of a few years it would be constitutional.
W e went through similar developments in the case of accident compensation laws. They were at first unconstitutional, and then they
became constitutional.
The CHAIRMAN. S O it is not always necessary to have a constitutional amendment to have the thing become constitutional.
Doctor COMMONS. All you need is to have judges who are willing
to study the economic situation that you are up against, and the Constitution is sufficiently elastic to take care of any evil in the community which the judges themselves appreciate as an evil. We get
the decisions eventually. I have calculated, as I say, a 15-year lag
on some things, so I think I have the operations of the judicial mind
down statistically.
I t is an interesting thing that with all the opposition in the States
to this law, the manufacturers and others never brought up that
question that you have asked. No manufacturer in Wisconsin ever
raised the question of whether this was constitutional.
The CHAIRMAN. I can see a difference between an accident and
just simply a question of economic conditions, which will prevent
Doctor COMMONS. Oh, there is a difference, and in the case of accidents Ave had this other situation. The compensation law came as a
substitute for the old employers' liability. There has been in the law
no employment liability. Our system has not been built on the
liability of the employer to furnish steady employment. There has



been, however, a responsibility to keep his place of employment safe.
There is a big difference constitutionally and economically, it is
true. This is an advance. There is no doubt about that. The
question now is economics, and what motives are you going to appeal
to ? The European idea or the insurance idea is based on the principle that some circumstances outside of industry, natural causes, produce unemployment. Neither the State can prevent unemployment,
nor the employers, nor the unions. This individual responsibility of
law is based on a different notion. First, it is based on the notion
that the working people should not contribute to the fund simply
because they could never stabilize employment if they did contribute.
I t was purely a mutual insurance idea if the workingmen contributed. The State should not contribute, because the State never
could stabilize employment. There is no way in which public officials
can stabilize employment. The only people who can possibly stabilize it are the employers themselves, and the question is, then,
is that a sound economic analysis, can a system be devised similar to
accident compensation by which not merely responsibility, which
Mr. Leeds accepts, but also legal responsibility in the form of a
right of action can be created. Then the employer could provide in
his own way for the meeting of that new responsibility or that legal
liability, and the theory then is that the States will do the least
possible interfering, and it reduces it down just to one thing, a legal
right of action. That is all.
If we could get it down to the point where there would be nothing
but a legal right of action against the employer for a loss to a man
because he can not furnish him work, then we will have all the
State should need to do in the matter; but we found that when that
was worked out in the accident compensation law there had to be
certain supervisory machinery, and it could not be left to the ordinary
courts on account of the great amount of litigation. We had therefore to set up some sort of an appeal board. Then the other important thing, still more important than that, was this: There are just
two ways in which employers can stabilize employment. One is
by watching their own individual establishment and trying to plan
the work, and so on. That is quite familiar nowadays, reducing
the turnover and so stabilizing their own plan. The other is, when
they find it necessary to lay a man off, to find him a job as soon as
possible. The best employment agencies in the United States are
not the public employment offices. They are the employers themselves. They are the people who can find jobs for the men that they
lay off. Nobody else can do it as effectively as the employers themselves. If we can place those two inducements or motives upon
the employer, first, to smooth out his employment, and then, if he can
not succeed through business success or anything else, he will set
up the agency by which employment will be found for his employees,
the load will be taken off him by other firms. Then it naturally
follows that he would have that liability placed upon him, as in
Wisconsin, if that was adopted, $1 a day for 13 weeks; but it would
then become the duty of the employees to find a job or to accept
a job. I t required some discrimination to determine whether it
was an acceptable job or not. As soon as the job was found for the
employee, or if he refused to take it, or if he did take it, then the employer's liability ceased. So if the employer went out and found



him a job, and we put it at a dollar a day, the employer would
save about $90. If he does not find a job, or if the man does not
get one himself, he pays the $90. That means a system of employment offices, a system of mutually conducted employment offices.
We had some experience during the war in developing a system
of employment offices in Wisconsin under this same industrial commission, and it was necessary to have a system of employment offices
for several reasons. First, you must get your statistics of unemployment, and you must have some place where the unemployed
worker will register; and I know of no way of getting statistics
except by having a system of employment offices where every man
registers as soon as he is out of work and where his name is taken
off when he gets work. We set up that system in the Chicago market, and I will explain how it was in the State of Wisconsin.
We had a number of offices established there, and this in the principle on which these offices were established. Take the Milwaukee
office. I will describe that, because I know concretely how it was,
and I took part in the organization of it. We have a committee of
management of the employment office in Milwaukee. I t consists of
four representatives of the manufacturers, four representatives of
organized labor in the city, and you must remember that in Milwaukee we have this rather tense situation, that organized labor is
all socialistic, and the manufacturers are all capitalists, so a joint
body administering the office is significant. The employees in the
office are appointed by the State industrial commission. We have
12 offices. I n Milwaukee the employees are appointed. The locality,
the municipality, pays all of the operating expenses other than the
salary, so the city government and the county government each paying these operating expenses are represented on the board of management. The Federal Government has made the Milwaukee office
a proposition, and Mr. Jones can tell you about that, and they have
made them ex officio Federal employees, or at least their superintendent, which gives them the privilege of the post office. So you
see that it is a cooperative system. Now, the all-important thing is
the class of employees who administer these employment offices.
When the industrial commission took hold of that situation, we had
an employment-office system in Wisconsin which was solely political.
People were appointed and changed according to political influence and power. The result was that no legislature, no municipal
counsel, would ever appropriate money to this employment office.
They had been running for 20 years, and while the State and the
city made a gesture of finding work for the unemployed, yet by the
very fact of incompetency in the management, neither the State or
city would appropriate funds, so they had a just complaint that they
could not do anything because they did not have the funds, but on
the other hand the appropriating body could say,, you have not got
the funds because you can not do anything. You see the circle.
Under the law creating the employment offices under the management of the State industrial commission, they were placed under
civil-service rules. Now, we had this other difficulty there. Our
civil-service commission, like most civil-service commissions is what
I would call an academic body, made up of school-teachers, and I
think I know the psychology of school-teachers. Their examinations
were academic examinations, strictly. The question was, having



put those officers under the civil-service commission, how were we
going to get that civil-service commission to get men who had established qualifications for administration. They must have experience
with industry, and I mean the men who operate and man the emT
ployment office. Secondly, they must have personality by which
they can keep employers and employees working together, so that
the employer will have the confidence that he is going to get men,
that the office is not going to be used by the unions to injure the employer, and, thirdly, that the office is not to be used by the employers
to injure the unions. So we made this arrangement with the civilservice commission.
We had them hold an elimination examination, with the ordinary
qualifications of reading and writing and so on. I t turned out that
that excluded about 70 per cent of the applicants. Then the actual
appointment would be made, an oral examination in which this joint
committee of employers and employees examined the applicant, and
they jointly would select the applicant to run that employment
office. We have tried to follow that through generally in all administration of the labor laws in Wisconsin, so that it is a well-recognized method of doing things. The result is that when they started
the employment office in Milwaukee—and this advisory committee of
employees and employers have no legal authority and get no compensation—they selected the man they wanted and recommended him
to the State industrial commission for appointment, and then the
industrial commission sent this man to the civil service commission
and thus he got on the State pay roll.
As showing the success with which that worked in the selection of competent people and the way in which this class-conscious
bias between capital and labor, which is probably more intense
and has been more intense in our city because we have the socialistic party, the first two chief officers appointed in the Milwaukee office were Socialists. The employers agreed that the two
best people to have charge of that office were two Socialists, and it
turned out that they established the office and got it going.
Then, after these people disappeared voluntarily for other jobs,
the next person put in charge was a railroad contractor who was
supposed to represent the employing interests, and he has been running it fairly successfully since that time, I think, but the labor
people consented to his employment. If you have a system of employment offices of that type in which you have the two sides administering it, and yet cooperating as advisory with the State
authorities and with this kind of a civil service law, I think we can
establish employment offices that will be adapted to administering
an unemployment compensation law if we could get that kind of
The CHAIRMAN. I understand that you are going to be here tomorrow ?
Doctor COMMONS. Yes.
The CHAIRMAN. I t is now 12 o'clock, and the Senate convenes at
12 o'clock. We will adjourn at this point until to-morrow at 10.30
o'clock a. m.
(Accordingly, at 12 o'clock m., the committee adjourned to meet
to-morrow, Friday, February 8, 1929, at 10.30 o'clock a. m.)


Washington, D. 0.
The subcommittee met, pursuant to adjournment, at 10.30 o'clock,
a. m., in room 355, Senate Oifice Building, Senator James Couzens
Present: Senators Couzens (chairman), Tyson, and Walsh of
Present also: Dr. Isador Lubin, assistant to the committee.
The CHAIRMAN. Doctor Commons, when you left off yesterday,
you were starting to tell us about the agreement of the garment
workers' plan in Chicago.
Doctor COMMONS. Mr. Chairman, I have some matters I wish to
introduce as exhibits, if I may, and then I shall take up the work
back and forth across them, and in that way I think I can save
time, and cover the clothing industry and the others.
(Exhibits submitted by Doctor Commons will be found at conclusion of his testimony.)
The CHAIRMAN. Very well.
Doctor COMMONS. I have first Exhibit 1, the H a r t , Schaffner &
Marx unemployment-fund agreement of 1923. That is the agreement of 1923. I t covers the clothing industry of Chicago, although
it is printed by Hart, Schaffner & Marx. Then comes Exhibit No. 2,
which is a revision of the Chicago agreement, entitled " Unemployment insurance fund, agreement of 1928." Next I shall take the
liberty of introducing as part of my exhibit, two communications
addressed to the chairman, Senator Couzens. The first is Exhibit
No. 3, being the statement of Dr. Benjamin M. Squires, chairman of
the unemployment insurance fund in Chicago. Mr. Squires is my
successor in that chairmanship.
Exhibit No. 4, is a letter to Senator Couzens from E a r l D. Howard, the labor manager of the Hart, Schaffner & Marx firm, dated
January 22, 1929. Exhibit No. 5 is a digest of the Huber unemployment prevention bill of 1921, a statement of mine respecting the bill,
and a copy of the bill itself. This is entitled " Huber Unemployment
Prevention Bill, 1921." Exhibit No. 6 is a revision of the Huber
unemployment prevention bill of 1925. I am submitting that in




manuscript, because I have not the legislative copy. Then comes
Exhibit No. 7, which consists of three volumes of mimeographed
reports by the Industrial Eelations Counsellors, 165 Broadway,
New York, dated February, March, and April, 1928. The first volume containing a report of company plans, the second the joint
agreement plans, and the third the proposed legislation. I should
say regarding this report that it is a confidential report, preliminary,
gotten out by the Industrial Eelations Counsellors, and since coming to Washington I wired them as to whether they would consent
to its being introduced as an exhibit in this hearing, and I have a
telegram from them consenting that it be introduced. My reason
for submitting that report, while it is quite extensive, is because it
is by far the best investigation by the most competent people that
could be made on this subject of unemployment insurance. The
Industrial Eelations Counsellors is an organization established originally on the foundation of John D. Eockefeller, jr. The people
employed are experts in this whole subject of industrial relations,
the most distinguished men. One is Mr. Bryce Stewart, who appeared before your committee. He was the main instrument in
developing the organization of the Chicago market. I t is as if this
committee were to employ the best experts in the country to investigate this subject, and bring it down to 1928.
Doctor L U B I N . Doctor Commons, I suggest that you tell the committee what they contain.
Doctor COMMONS. I am quite certain that all employers who are
considering anything along this line would want these reports,
because they enter into great detail and are admirably digested. I n
the first volume there are reports of 12 company plans, including the
plan of Leeds and Northrup, that was presented to you yesterday
by Mr. Leeds. I showed him this report, and he seemed quite satisfied with it. The second volume is on joint agreements, and this one
includes an exceptionally competent report on the Chicago system
and permits me to skip over many details that might otherwise
occupy your time, but it has several other joint agreement systems.
The third volume is on proposed legislation, which includes an
excellent statement of the Huber unemployment prevention bill, and
all of the legislation that has been proposed in any American State,
giving the pros and cons of opinion regarding these measures, so
that it is practically an authoritative statement of that aspect of the
question. This is Exhibit 7, in three parts.
I shall now take up the Chicago market system in the men's
clothing industry, and present some of the general principles illustrating them by the way, in which it was worked out in the Chicago
market, and then go from that onto the other aspects of the question,
State and Federal. First, as to what you might say were the theories
or expectations nine years ago when this matter was first presented,
of what could be accomplished by unemployment insurance, so called.
There were three things which were advocated at the time as reasonable to be expected by the enactment of such legislation, and by
the installation of a corresponding system in the Chicago clothing
market. The Chicago clothing market system is exactly the one that
is proposed in the Huber unemployment prevention bill, except that
the Chicago market is by joint agreement, by the associated manufac



turers and organized employees, while the other is legislative. The
three things expected were, first, an inducement to the employers to
regularize their employment. The second was an inducement to the
employees to remove their restrictions on output, and to cooperate
with the management in increasing the efficiency of the industry.
The third was an inducement to the employers and manufacturers to
cooperate in the establishment of free public employment offices.
These three were the expectations or the theories underlying the
proposition at its beginning. I shall take those up in order, but
will begin with the Chicago market and go into those three aspects
of the question and see to what extent we can discover whether
those expectations were realized.
This agreement in the Chicago market took effect in 1923. During
the first year no benefits were made.
Senator TYSON. With whom was the agreement made?
Doctor COMMONS. I t was made by the Associated Clothing Manufacturers, manufacturers of men's clothing, in the Chicago market,
some 400 firms, and the Amalgamated Clothing Workers of America.
At that time there were about 30,000 employees in the Chicago district, and for the first year they collected funds. I have a statement
of the results to date, to January 19, 1929, that is, of the financial
results. During this time there have been contributed to these funds,
that is, since 1923 through 1928, $5,050,428. There have been paid
out as benefits to the workers, $4,081,116, to which should be added
a special arrangement of $103,671. The general office expenses consisted of equipment, $21,000, and operating expenses during these
five years, $324,000. If you compare the benefits account, $4,100,000,
with the operating expenses, $324,000, you will find that the operating expense is about 8 per cent. This being a mutual association,
8 per cent is a very good record.
The CHAIRMAN. I think you told us yesterday the proportions in
which this contribution was made, did you not, or whether it was
made all by the employers ?
Doctor COMMONS. I shall develop that as soon as I make this
statement. There is a balance on hand in January, 1929, of $593,000.
The agreement which started this arrangement in the Chicago
market was under consideration for two or three years. Finally it
developed to this effect, that the employers agreed to pay into the
fund 1% per cent of the pay roll, and the employees agreed to authorize their employers to deduct from their wages a corresponding l1/^
per cent, making 3 per cent on the pay roll. I n 1928, the employers
increased their contribution to 3 per cent. That agreement runs to
1931. The present agreement is 4% per cent on the pay roll.
There are two systems operating in the Chicago market, possibly
three. First, the general idea is that this should not be an insurance
fund in the ordinary sense in which one firm pays for the unemployment of another firm, but that it should be a house or establishment fund, in which a company is responsible only to its own employees. There were only about 70 firms of size enough to undertake that kind of individual establishment responsibility, so it was
necessary to organize the small firms into a mutual insurance company of about 400 small firms. So that we have in the Chicago
market about 70 different boards of trustees. Each house has its own




board of trustees, making about 70 separate boards. Then these
small contractors are united in one common fund. That is strictly
a market or insurance fund. I n order to obtain uniformity all of
these boards elected the same person as chairman. I was chairman
of the 70 different boards, and the administrative problem was how
to get them all to act uniformly, and that was worked out by a system
of conferences and then holding meetings independently of about
three board meetings—three different boards. That is a detail of
the organization that I need not go into. The next thing was how
to handle the funds. I t was necessary to set up one central office
for handling the funds for all these different boards, and keeping
accounts with all the firms and also keeping an account with each
one of the 30,000 wage earners as to their employment and unemployment. I t required a little time to install that system, but by the aid
of companies whose business it is to establish offices of that kind, we
put in a system of labor-saving devices of various kinds. The significance of that is that 30,000 checks had to be written twice a year
for 30,000 employees, and accounts kept with each one of those
30,000 employees and with the firms themselves individually—rather
a large bookkeeping proposition, but the fact that they got through
on an 8 per cent operating expense shows that it can be done very
reasonably. That does not include all of the expense. I might say
that the most important thing in the minds of the people working in
the matter ivas to create confidence upon the part of the 30,000
workers that their future was being cared for in periods of unemployment, and to inspire confidence in them that this was to their
interest, that it would affiliate them directly with industry, so that
there might be developed a psychology or attitude of approval of
this system.
I t was devised that these checks should be distributed in two payments, not weekly payments but in two* lump sums. The fund is
not a large one. I t amounts only to about $60 or $70 per year to an
employee, so that he will get a check for $30 or $35 twice a year.
I t must be remembered that this industry is highly seasonal. A t
that time, 1923, there were only about 35 weeks of employment on
the average in the market, leaving about 17 weeks of unemployment.
I t has now been reduced so that they have about 40 weeks of employment this last year, leaving 12 weeks of unemployment. The
result of that is that every employee is entitled to unemployment
The CHAIRMAN. You mean by that at some period of the year
everybody is unemployed?
Doctor COMMONS. Practically everybody is unemployed, and the
average at that time was 17 weeks of unemployment, and now it is
an average in 1928 of 12 weeks.
The CHAIRMAN. I understand that the industry is in such a position that there is no continuity of employment for anybody. I s
that correct?
Doctor COMMONS. There are two seasons in the clothing industry.
The CHAIRMAN. Yes; but does a plant relieve itself of all of its
employees at some period of the year—of foremen and superintendents and workers of all kinds ?
Doctor COMMONS. The great bulk of them. Practically all of
them, yes, are entitled to relief, are laid off.



The CHAIRMAN. A t some time during the year?
Doctor COMMONS. Yes. The industry is largely conducted on the
order basis. I shall speak further of how the companies have started
in to regularize, and how some firms have reached the point where
1 was told that there was one that is now built up to 52 weeks of
employment, so that it has now no unemployment relief. T h a t is
exceptional. The ordinary firm, marketing competitively in the
national market, and largely on orders, is not able to give steady
employment, but two or three firms have developed devices and so
operate their affairs now that they have about 47 weeks of employment. We call that 47 weeks of employment full employment, and
we have put in 5 weeks of holidays and vacations—two weeks of
vacations, twice a year, and holidays, during which they are unemployed.
Senator TYSON. I n what months as a rule are these distributions
Doctor COMMONS. At the end of the season.
Senator TYSON. What time does the season begin ?
Doctor COMMONS. The seasons run from November to May and
from May to October. They are now working on the summer goods
for next summer. They will be off the summer goods about May.
Senator TYSON. Then you give them the benefit?
Doctor COMMONS. Then along in June following they will get
the unemployment benefit for the preceding season.
Senator TYSON. And you say that that average is about $35 every
half year?
Doctor COMMONS. Yes. The psychology of it is t h i s : During the
first year when contributions were being paid in both by employees
and employers, and it was being deducted from their pay envelopes,
there was a good deal of dissatisfaction and unrest. The first
payment was made after it had been going about a year and a half.
I t was made by calling together the employees of the various shops,
and distributing at that time the checks to the individuals. They
were called together by the business agents of the union who distributed the checks. I remember when that first check distribution
was made. I don't know how many thousand workers received
checks, but the attitude of the whole rank and file of them changed
immediately, and they became firm supporters of the unemployment
insurance. I shall speak about the effect of that later.
Senator TYSON. May I ask what is the average wage ? You spoke
about their getting $35 semiannually. About what is the average
wage per week?
Doctor COMMONS. The average wage for the market for the year
ending May 2, 1928, for the Chicago market, is $1,564. The average
weekly wage distributed over the 52 weeks would be $30. The
average for the full-time weekly wage, actual work time, was $40.
This figure is on the basis of 40 full-time weeks employed.
The CHAIRMAN. What is the percentage of men and women engaged in the industry.
Doctor COMMONS. I t is 40 per cent women and 60 per cent men.
The average hourly rate of pay is 91 cents.
Senator TYSON. And what hours do they work?
Doctor COMMONS. Forty-four hours a week is the full tijgie.



Senator TYSON. That is 8 hours for 5 days and 4 hours on
Doctor COMMONS. That is the idea. The average actual work
during the year was 33 hours. I shall speak first of the feature that
I mentioned last, the employment office. I n any scheme of unemployment insurance, the first requisite is a satisfactory system of employment offices for registration, and keeping a record of the individual
employees, and determining the liability of the fund toward them.
I know of no system of unemployment insurance which has not
been preceded either in Europe or America by a satisfactory system
of employment offices. I n the case of the Chicago market, the
union has established an employment office of its own and has done
it on a very exceptional basis. They brought it from the Canadian
Department of Labor, Mr. Bryce Stewart, who testified before you,
and put him in charge of building up their employment office. He
was with them three or four years, and built up a very remarkable
system of employment offices. When this unemployment insurance
system came in the unemployment trustees'began to take some jurisdiction over the union employment office. I t had to impose upon
the union office, which theretofore had been run in the interest of the
union, certain rules, records, and reports, and to have close connection with the employment offices. That was worked out in great
detail, so that we had the basis of a registration office there which
might keep reports. The rule was substantially this. When a man
or woman was laid off or out of work, he or she had to report immediately to the employment office. Unemployment benefit does not
begin until after the time they have reported themselves as unemployed, and as looking for work. Then when they find work, or
when the office finds work for them, they are taken off the unemployment list and the record is made on their cards in the central
office of the unemployment fund. So that for the first time we have
accurate statistics of employment and unemployment in the clothing
industry. I t is as accurate as anything could be in any business
operation. Previous to that it was entirely guesswork as to how
many were unemployed. So we have been able to make charts
which you will find in these exhibits of the cycles and seasons of unemployment.
I want now to extend the question of the unemployment office a
little further and take it up with reference to the Huber bill. The
Huber bill was based on the existence in the State of Wisconsin of
employment offices which we thought were very efficient. I shall
take the Milwaukee office, in order to bring out the idea of an efficient administration of employment offices, not only for ordinary
employment purposes, but also as a basis for an unemployment insurance system. The employment office in Milwaukee, for example,
is operated by the State industrial commission, so far as the payment
of salaries is concerned. The city and county of Milwaukee contributes to equipment and maintenance, telephone and similar things.
Then an advisory committee" is appointed, consisting of 4 representatives from the chamber of commerce, the employers, and 4 rep,resentatives from the Federation of Labor—that is, organized labor—
4 from the city government, and 4 from the county government,
making 1^ on the advisory committee. The most essential thing



about an employment office is the training of the officers who do
this work.
Ordinarily we find that under our political system there is stability of emploment by the officials of the employment offices. They
are changed whenever there is a change in administration, there is
no future for them; but an arrangement was made in this case by
which officers should be placed under civil-service rules of the
State civil service commission, which would hold an elimination
examination, and then the committee of employers representing the
chamber of commerce, and the committee of the Federation of
Labor held an oral examination and selected the people to man the
employment office. They make their recommendations to the industrial commission. I t certifies that to the civil service commission, and in that way they get on to the State pay roll. That
is wholly elminating politics from the organization. I t is surprising what powerful influence is brought upon a governor to
retain incompetent people in employment offices. We came against
that when we started the employment office, because we had to remove the preceding official who had been appointed, and when we
removed him the governor was borne down upon by judges and the
principal politicians of Milwaukee. We could not possibly have
resisted the pressure, and the only way in which we could resist
the political pressure was by referring all of these citizens, judges,
and others who were supporting this man, to this committee of
employers who were in charge along with the unions of the Milwaukee employment office, and those employers who had no political motive in the matter, who simply wanted to get efficient employment officers, immediately disposed of these objectors, and the
whole system was established on that basis.
I don't believe that we can have public employment offices in
this country until the employers are willing to support those offices.
We may make a gesture of establishing employment offices, as applied to the State and Federal Governments, but we have no civil
service rules for selection, we have no joint committees of employers
and unions.
The CHAIRMAN. T O whom do you refer when you say " we " ?
Doctor COMMONS. All of the people of the United States of
America, including the Federal Government.
The CHAIRMAN. D O you mean to say that we have no civil service
rules in the Federal Government?
Doctor COMMONS. We have none in the employment office service.
The CHAIRMAN. Of course they could be placed under civil service
by legislation. Mr. Jones, of the Department of Labor, is here, and
I will ask him whether that is correct ?
Mr. JONES. None of them are under civil service. A few States,
as I understand it, as, for instance, in New Jersey, have civil service,
and also in the city of Newark. I think they are under the civil
service there, but it is not a general proposition as Doctor Commons
says. I t is political.
Doctor COMMONS. That means incompetency to begin with.
Senator TYSON. Did I understand you to say that when this man
was dismissed, when you finally got rid of him, they were under
civil service in Wisconsin at that time ?



Doctor COMMONS. N O ; he had not been under civil service. We
had had an employment system for 10 or 15 years, but not under
civil service. When we started this system that I speak of in 1911,
then it was put under the civil service.
Senator TYSON. And it is under civil service now ?
Doctor COMMONS. Yes. This is the point I wish to make about
civil service, and I think it is altogether important. W e will never
have adequate employment offices until something of this kind is
done. We must have them actually administered by the organized
employers, and I think in cooperation with organized labor, and if
I were to suggest any form of administration for the Federal service,
I could only base it upon the experience which we have had in Wisconsin in administering it, especially the Milwaukee office, and that
the Director General of the Federal Employment Service should be
authorized to appoint advisory committees, representative of the
employers and employed. You could not very well put that in the
law, of course, that it should be organized labor. I shall give my
reasons why it should be organized labor. There should be some
provision regulating civil-service rules to the effect that this be the
organized employers and the organized employees, because it would
be something like the national association of manufacturers and the
American Federation of Labor—that they should be the ones to hold
the oral examinations on fitness, and to certify their recommendation of their selection to the director general, and, of course, to the
Department of Labor, or whatever administrative department has
it in charge. This is what is accomplished: The civil-service examination ordinarily can take into account only educational qualifications. I t can not take into account the fitness for the job. Here
is the peculiar kind of fitness necessary in these employment offices,
which no examination can ever accomplish.
The person selected to operate the office must be one who can have
the confidence of the employers who handle and patronize the office,
so that he is able to go out and solicit patronage. H e must have the
confidence of organized labor, because the political attacks which
will be made on the system by candidates for office, who will advocate
that these offices are created in the interest of labor and that labor
should control those offices, and, consequently, in order to head off
that kind of political attack, organized labor should be represented
on the boards that actually select the staff, so that they can report to
their organizations whether the thing is on the level or not, and the
manufacturers should be represented so that they can similarly report to their constituency to see whether it is on the level, and it is
not worth while to take into account unorganized employers or unorganized labor, because they have no constituency to report to. That
does not interfere with the manufacturers association having its own
employment office. For example, in the Milwaukee system, one of
the four representatives of the employers in managing the municipal
office is the secretary of the employment service of the metal-trades
association. An employers' association needs to have its own employment service, for two reasons. One is that it may connect up with
the skilled mechanics and may transfer them from one shop to
another, as in the metal trades, and the other is that it may be able to
head off organized labor. I t usually has a detective system along



with the employment office, and those businesses are naturally necessarily a part of an employers' employment service.
On the other hand, the unions, as in the Chicago system, want to
set up their own employment office for exactly the same reason, that
they may control the labor supply, and so the two systems of employment offices operated by the employers and by the unions are
what you might call the militant employers' union association, and
at the same time those agencies can go on and you can still have a
public office as shown by our experience. One of the most useful
members on this advisory board is a man in charge of the metal
trade association employment system.
The CHAIRMAN. YOU mean the employers' association ?
Doctor COMMONS. Yes. I call it the metal trades association. So
I would not think it worth while to recommend a Federal or State
employment system that did not have a provision of the kind that
I have mentioned, of the joint management by capital and labor,
but simply as an advisory body, because the director need not take
their advice. But as a body which actually does manage in the
sense that it has a voice in the selection of the staff.
The CHAIRMAN. YOU say that this advisory council or board
should be made up of organized labor and organized manufacturers
or employers. Would that in any way militate against the unorganized workers or the unorganized manufacturer or employer ?
Doctor COMMONS. The manufacturer's side of the advisory committee is always going to protect unorganized labor. They are not
going to allow him to be discriminated against by the union. If
you have the two together, it is impossible to discriminate against
the unorganized. On the union side, it is not so much the efficiency of
the union as compared with the efficiency of the employer, for we
find that the efficiency is much more the employer's side; their representatives are the ones who have initiative and experience; but on
the union side, being present and participating, they can assure labor
that the thing is being conducted without discrimination against
organized labor, so that you get then a personal administration;
and by the very nature of the advisory board, really the governing
board, which, in Milwaukee, meets once a week to go over the week's
work, there can be no discrimination either for organized labor or for
unorganized labor.
The CHAIRMAN. Have you any statistics as to the number of men
who clear through these agencies ?
Doctor COMMONS. Mr. Jones can give you all of the statistics of
the Wisconsin office. He has them at his disposal.
Senator TYSON. Does any unorganized labor apply to them?
Doctor COMMONS. Oh, the great bulk of applicants is unorganized
Senator TYSON. I t is not controlled by organized labor, so that the
unorganized do not come there and make application for employment?
Doctor COMMONS. I should say that 95 per cent was unorganized
labor. Would not you, Mr. Jones? That is, in the Milwaukee office?
Mr. JONES. Yes. Organized labor takes care of their own.
Doctor COMMONS. Yes; the organized unions will take care of their
own mechanics, and the employers are more concerned about keeping



a list in their organization of the skilled people they need, so that
these public offices are more for unskilled and common labor. That
is an important fact. I t is the only way in which that class of labor
is goig to have a square deal from the American public as to job
Senator TYSON. YOU think then that the organized labor on the
committee protects the unorganized labor ?
Doctor COMMONS. I t protects the organized Jabor. The manufacturers protect the unorganized labor.
Senator TYSON. Don't you think that the unorganized labor ought
to have some protection for themselves?
The CHAIRMAN. If they are not organized, how would they send
their representatives there?
Senator TYSON. Any man who is not representing organized labor.
There can be some man, it strikes me, who could represent unorganized labor as well as organized labor.
The CHAIRMAN. I don't see how you can represent anything if you
are not organized. I don't see how a Member of the House or the
Senate could represent anybody if he did not have the organized
Senator TYSON. I can see how one man can represent everybody,
how one man can represent organized labor, and somebody represent
everybody in the State. I t strikes me that everybody has a right to
be represented. I don't see why ; you should confine it to the employers and to organized labor when 95 per cent of the people interested
are not organized.
The CHAIRMAN. The point of the thing lies in the fact that it has
Senator TYSON. That is the same point we have been fighting for
for 150 years. You have no representation here. I t does not make
any difference to me, but I think myself that the organized labor
helps to hold the prices in wages for everybody in the country. When
they get them everybody else is affected beneficially by it, but at the
same time it seems to me that when you put up two classes of people,
one of them representing 95 per cent of them, that you are hardly
giving those 95 per cent much representation.
Doctor COMMONS, Senator, it is a condition that we face rather
than the theory.
Senator TYSON. That is what I am speaking about.
Doctor COMMONS. Prior to the installation of this system—and I
am speaking of my own knowledge, having a year in administration
and in the installation of it, we went on the theory that one man was
as good as another for running an employment office, and we found
this: That it was run solely by those who had political influence.
Now we put in this system of having a joint committee. The city
federation of labor names four people, the organized manufacturers
name four people, and they are the people who are fighting each
The unorganized are not doing any fighting at all. They are not
engaged in any political movements to amount to anything. They
are negroes and other classes of people and are advised that it is impossible for them ever to select a person that would represent them.
So that the person who is presumably representing them is selected



by political influence, so that, so far as this thing is concerned—this
particular problem that we are up against—it is the conflict between
capital and labor, and that is the conflict between organized capital
and organized labor. That is the condition that we have to face,
and the question is, if there is going to be any disturbance, or any
breaking down of the system, it is not going to come from the unorganized, but it is going to come from the organized labor or from
the organized capital, the organized employers. The real difficulty
in the whole matter is to get the organized employers—who in
our case are practically all open-shop or antiunion employers—to be
willing to sit with the representatives of organized labor. I n our
case organized labor has been controlled by the Socialists and the
Communists so that there is keen antagonism between them, and it
takes some ingenuity and a clean, open-cut program to get the two
to work and meet together and to agree together upon the selection
of a staff; and that staff must be selected so that it will not show
any discrimination either in favor of employers or in favor of employees, and after the thing got to going—and at first it took a little
time—the thing for the last 15 years has worked automatically, and
we have employers on that committee, and we have had the representative of the International Harvester Co., the superintendent in
Milwaukee, who was probably the genius on this whole thing, and
he took a personal interest in it and developed it, and more to him
than to anyone else is owing the perfection of the whole mechanism;
and organized labor simply sat by and looked at him manage it.
That is the way that this think has worked out.
Organized labor could then say to their constituency, " Why, the
International Harvester Co. is not running this office, because we are
there and we see what is doing; we know what the office is doing,"
so that they have perfect confidence; and I don't know of any other
instance where the employers and the unions in our State come together and do any talking together at all. They not only do not
recognize each other, but they are politically against each other.
The question is how to get them out of politics. We have the
Socialist-Labor P a r t y in our State. We have really a European
class-struggle situation, and we had to meet that practically, and that
is the way that we met it.
I n looking over the national situation I can not see really much
difference if we are going to establish a Federal system.
The CHAIRMAN. I S it not a fact that the railroads through some
such system as you have suggested have largely overcome the carshortage proposition ?
Doctor COMMONS. Yes.
The CHAIRMAN. I remember that after the great car shortage happened, the railroad executive association here organized councils in
all the big districts and distributed their car equipment, and on that
council the shipper was represented and the railroad was represented ; and I think that system, purely voluntary, has largely solved
the whole car-shortage difficulty of the country. I t is one of the
most successful things that the railroads have done since the war.
Doctor COMMONS. I t seems to me that all legislation for the future
in dealing with this question of antagonism between employer and
employees will have to recognize that it is only through collective
action that Congress can hope to get the results they want to have. I t



is organized capital and organized labor that are equipped to act,
and if they can be brought together to run the employment offices,
that will be the solution. Of course you have your chairman or
your director, and an employee of the Government selected under
proper civil-service regulations, and the director himself ought, to
be selected by this joint body.
The CHAIRMAN. After he has passed the academic examination.
Doctor COMMONS. Yes; so that he would have permanent tenure
of office. He would be satisfactory to both sides, and they would
know that everything was on the level. There is a third element that
should be represented, which you do not get from organized employers or from organized labor, ^,nd we find that quite,important. There
is what you might call the expert public. I may be speaking here
somewhat in favor of professors, but we have developed in the various
economic fields men of great eminence. Take this industrial relations counselors crowd. The kind of men who do that work should
be on these advisory committees, because they are the men who are
studying this thing in all phases and in all countries, and some of
them have had a good deal of experience in administering these
offices. The director general should be able to select for his advisory
committee an equal number possibly of that type of people.
None of them should be paid any salary or any per diem. They
should be paid only expenses, because if there is any money in it,
for anybody, you are going to ruin it. By having it purely voluntary, we have on our committees in Wisconsin men whom you could
not get for a hundred dollars a day—engineers, managers of big
properties—and you could not pay them enough, the State can not
hire them, and it is necessary only to pay their expenses, because
otherwise the laboring people could not attend. The expenses are
the only things that should be paid. There should be no per diems,
because you will understand the kind of people that get in when they
pay a per diem. They stretch that out and get quite a little picking
out of it. You want to get the busy men, the men who are actually
solving problems in their own establishments every day. They are
the people who should be enlisted in this whole national and State
and municipal employment service, and you can command their services if you have the proper organization along the lines that I am
speaking of. I think our 17 years of experience in this line has
demonstrated that. You may question Mr. Jones when he comes
before you about the employment office at Milwaukee. I t is a part
of the Federal system now. I shall not go any further into that.
The next question that I expect to promote by unemploymentinsurance system, assuming that we have an employment-office system
that will function, is the promotion of efficiency. I shall have to
make a distinction between two kinds of efficiency. One I might
call spiritual efficiency—a willingness to cooperate, and the other
technological—that is, the work of the engineer, the production
manager, and so on. This unemployment insurance is directed toward bringing about on the part of the wage earners a favorable
attitude toward increasing efficiency. I have worked on that subject
for 30 years, and if you do not mind I shall give you my first piece
of investigation on that. I t is in the eleventh special report of the
United States Department of Labor in 1914, a report on the restric



tion of output. I investigated for the Department of Labor a
number of industries in this country and in England as to the restrictions of output by organized labor and unorganized labor, and
the result of that investigation convinced me that there is just one
reason why labor is opposed to efficiency, opposed to increased production. I t is simply the fear of unemployment, the fear that they
will kill the job, the fear that they will throw themselves out of a
job. I shall give you one concrete case, and I think perhaps you
will appreciate this argument. A friend of mine, a manufacturer
with about 2,000 employees, held a very humanitarian idea. He was
new at the manufacturing business. I n fact he had been a professor in our engineering college. He went into business, with a
professor's idea of humanity rather than with a business man's
roughneck " idea, if you will allow me that expression. He had a
large contract, and when it was finished he knew that he would have
to lay off his whole force for some three or four or five weeks. He
reasoned to himself, " W h a t would I want to know if I were going
to be laid off? Wouldn't I want to have a chance to get a job? "
So he said that the fair thing for him to do by his employees was to
give them two weeks' notice that when the job was finished they
would have to be laid off. So he gave them two weeks' notice in a
spirit of kindliness. The whole force, which was unorganized, and
an open shop, laid down on the job, and it took them five weeks to
finish that piece of work, and he went in the hole financially. H e
simply changed from a humanitarian to a " roughneck," and he is
new one of our hard-boiled employers.
What was the reason ? Labor has families to feed. The one dread
that causes them to restrict output—and it is not true simply of
organized labor but runs through the whole ranks of labor—is the
fear of unemployment. I have tested the situation in the Chicago
market prior to coming here as to the efficiency question, and I tried
to find out whether this unemployment insurance in the Chicago
market had accomplished what I thought it would by reducing that
fear of unemployment. I have figures here from one of the firms
that I am not permitted to release yet—I may get permission later—
and I shall have to give you merely the result.
The system went into effect with the first payment of the benefit
to employees, about 1924. I n 1925 the union appointed a committee
to meet and to work with the committee of the employers and go
through all of the shops and find out whether there was any restriction of output and to remove it. This affected several firms, but I
am speaking of the one that I have in mind, with about 2,000 employees. This particular firm was about to go on the rocks. I t s
unemployment fund was exhausted practically; we expected it would
come out on the deficit side. The union went to work to save that
firm from.going on the rocks. They enabled it to put on a different
line of garment, to sell at a lower price. They cut out all of the
restrictions and permitted the company to introduce mechanical devices, and the result is this, that during the period since 1925 the
output per man-hour has increased just 40 per cent in three years.
Because of this increased efficiency the number of suits per 44 hours
has increased 40 per 5cent. W h a t happened is this. We had a remarkable burst of what I call spiritual efficiency, and I want to show



the significance of that. I have known that clothing market for 30
years. All of the people employed there were Bolsheviks. I used
to talk to them organized labor, and they used to talk in this casual
way about how they would do when they took oyer the different
manufacturing firms and operated them by the union. This is the
way they put it. If the management was decent about it and did
not raise a row, they were going to put them on a salary, and if they
were not decent they would take them over and let the management
go. They changed entirely and since 1925 are quite different. I
have students who have been labor managers in industry, and they
tell me now that that union has lost its ginger, its pep, and is turning
to try to help the employers make profits.
Senator W A L S H of Massachusetts. What has caused that change
of mind ?
Doctor COMMONS. This unemployment insurance has been the
principal factor, in my judgment. Since 1925 they have not had a
stoppage. The union could not control little shop strikes, but they
have not had a stoppage. Most of the suggestions for substituting
machinery for hand labor have come from the mechanics of the
union. I could go into those details, but it is not necessary.
The suit which they formerly had to sell for a certain price, and
I shall not give you the price, they have reduced in price about 25
per cent to the public. They have shortened the hours, they have
increased the wages, and the statements by the firm show a larger
profit continuously, and the interesting thing about it is that the
union points to the financial statements of this company as a justification for their participation with the firm in these various increases
in efficiency.
The CHAIRMAN. I n the case of that concern that you state was
about to go on the rocks, did they come out successfully ?
Doctor COMMONS. They came out successfully. They put a 3uit
on that they sell for a third less, and they come out with a good
balance in this insurance fund at the end of the year, whereas we
expected that it would disappear; so quickly can these things operate
if you have cooperation. I mention that as an extreme case, a change
from an attitude of confiscation, the confiscatory attitude of the
immigrant, largely Jewi$h laborers, and entirely communistic, over
to a cooperative organization helping the management in making
more profits, and they sharing of course. I was on an arbitration
board for them two or three years ago, and we gave the union 10
per cent increases in wages, and the employers now make better
The CHAIRMAN. I think yesterday Mr. Leeds said that he did not
believe that the employee should contribute to the unemployment
insurance. Have you any views on that?
Doctor COMMONS. I n the case of the system in Chicago the employees proposed that the employers should be the sole contributors, and they wanted the employers to contribute 3 per cent on the
pay roll. I n the final wind-up they divided 50-50, the workers paying iy2 per cent and the employers iy2 per cent. The argument
that influenced the employers was this: We need the cooperation
of the laborers not only in this but in increasing productivity, and
so on. We have to have them feel the sense that they have a financial



stake in it, and they said that they would not go ahead unless
organizd labor contributed. I t was against what the union wanted,
because they took the view that industry was responsible for their
employment and that the employers should take care of it. My
opinion was that that was a satisfactory solution, but when it came
to the revision in 1928, the employers increased their share up to
3 per cent, while the union left its at iy2 per cent. That was
not solely because the employers were satisfied that this was a good
thing but it was a part oi a trading arrangement. The union
wanted 40 hours instead of 44 hours per week, and the employers
did not want to give them 40 hours, but they were willing to increase the insurance to 3 per cent, and in that trading arrangement,
it came out in that way. I n the Huber bill it is imposed solely
upon the employer, and it is made so small, a dollar a day, that it
barely pays the rent, with the idea that thfe employers who operate
under this system would then develop cooperative schemes and get
contributions from labor or increase their contributions.
Senator W A L S H of Massachusetts. Has any legislation been passed
Doctor COMMONS. N O .
Senator W A L S H . What is this legislation?
Doctor COMMONS. I t is Wisconsin legislation.
Senator TYSON. That has not been adopted?
Doctor COMMONS. N O ; it is dead; just as dead as anything you
have here in Congress.
Senator W A L S H of Massachusetts. There has been no legislation?
Doctor COMMONS. N O . Here is the digest of all of the proposed
legislation in the United States, which I am submitting as an
The CHAIRMAN. What I would like to know is your own viewpoint
as to the psychology of the employee contributing. You recited a
statement of the facts without expressing your own opinion. What
is your opinion about it?
Doctor COMMON. I think that as a matter of legislation the employees should not be required to contribute. As a matter of company unions, where the employer runs the whole thing, as Mr. Leeds
says. 1 think the employee should not contribute.
As a matter of joint collective agreement between the employer and
the organized labor, I think the employees should contribute, and
that should be taken into account in the adjustment of the wages
agreed upon in their collective arrangements. I t depends upon the
purpose that you are going to accomplish.
The CHAIRMAN. I n other words, in your description you describe
two systems, the market and the establishment systems. I n the case
of the establishment system, you believe the employees should not
contribute ?
Doctor COMMONS. N O ; although both of these in Chicago happen
to be union agreements, both the market and the establishment.
The CHAIRMAN. I n the case of union agreements, you do not make
any distinction between the establishment and the market agreement ?
Doctor COMMONS. N O ; but in both of those cases the union members
should contribute. That had a remarkably good effect because you
got a union of the organized benefit to capitalism to deal with, and if



you can get them to assume responsibilities for discipline of their
rank and file, because the leaders are all right, they will welcome this,
and the problem is how to get the rank and file to fall in line.
Senator W A L S H of Massachusetts. Have you a digest of legislation
proposed or enacted in other countries than our own?
Doctor COMMONS. The industrial relations counsellors who prepared this exhibit are proceeding now to make an investigation of
European legislation which will be comparable to this, which I think
is the best piece of work that has been done.
Senator W A L S H . When will this be ready ?
Doctor COMMONS. They say that in book form later they will
have a comprehensive world-wide study of various forms of unemployment compensation. I know that they are at work upon it now,
and had people in Belgium and Holland last summer. I can not
say how soon it will be out.
Doctor L U B I N . I have an abstract of the English, German, and
Swiss systems that I am going to put into the record.
Senator TYSON. I S it your idea that there should be legislation
requiring employment insurance ?
Doctor COMMONS. NO ; I say at the present stage that there should
be no Federal legislation on unemployment insurance, that there
should be legislation along the lines that I am offering for the establishment of an unemployment service, that all legislation and all unemployment insurance should be left to voluntary efforts or to the
States, but that in the enactment of a law creating a Federal employment service there should be offered an encouragement to the States
and the localities to set up proper employment services, and to set
up insurance.
Senator WALSH of Massachusetts. Could we not legislate for the
District of Columbia and thereby set an example to the States?
Doctor COMMONS. YOU certainly could. You are the legislating
body for the District, and it could come only through your action
here. I have not been able to finish all of the points that I wish to
touch upon.
The CHAIRMAN. H O W long will it take you to finish ?
Doctor COMMONS. I think about half an hour.
The CHAIRMAN. A t this point we will have to adjourn, as it is 12
o'clock, and we will meet to-morrow at 10:30 o'clock a. m.
(Thereupon, at 12 o'clock noon, the committee adjourned to meet
to-morrow, Saturday, February 9, 1929, at 10.30 o'clock a. m.)


Washington, D. G.
The subcommittee met, pursuant to adjournment, in room 335 of
the Senate Office Building, at 10.30 o'clock a. m., Senator James
Couzens, presiding.
Present: Senators Couzens (chairman) and Tyson.
Present also: Dr. Isador Lubin, assistant to the committee.
The CHAIRMAN. YOU may proceed, Doctor Commons.
Doctor COMMONS. Mr. Chairman and Senators, the point that I
had reached yesterday was the third point which I had in mind with
reference to these matters, and that is the stabilization or regularization of employment. I had spoken about it as bearing on or promoting efficiency. That is mainly with reference to the attitude of the
employees. I have spoken of the inducement that it would offer,
and the necessity of having a proper Federal, State, and municipal
employment service. I should like to add to that that if a reorganization of the employment service is contemplated, we have an extraordinarily good example of how to proceed in the Federal Board
for Vocational Education. Their system is exactly the procedure
which should be followed in promoting employment offices run by
the States, and so on. But I shalj not go into that any further.
Senator TYSON. D O I understand that in these employment offices
by the Federal Government, the State, or the municipalities, they
are to be separate employment offices?
Doctor COMMONS. Briefly, the Federal service is the only one that
can operate the farm seasonal employment. They must be Federal
employment officers. All of the other officers should be State and
municipal. The Federal service, however, should have a staff of
competent people to bring up the level of the State employment
offices, in order to place its own agents in there to assist the State
offices, but put the responsibility on the State offices and then some
sort of aid based on the efficiency of the State system.
Senator TYSON. YOU mean monetary aid?
Doctor COMMONS. I would give a small monetary aid in order to
have the influence necessary upon the State.
Senator TYSON. YOU mean that the Government should give that
to the States only and not to the municipalities?




Doctor COMMONS. T O the States only. The Federal Vocational
Board gives a certain sum to the States, whose plans of vocational
education meet its requirements. The States must match that
amount, but the figures show that the States put in about three times
as much as the Federal Government, and in some cases five times
as much. That is the thing to encourage, to sort of bring them up
to a level and to have a national unification. You must have some
sort of Federal supervision—not doing the work of employment,
but attending to the plans which each State has.
Senator TYSON. Have supervision and at the same time make some
monetary appropriation ?
Doctor COMMONS. A small monetary aid, not the inducement of a
great amount, but small enough to encourage the State to go ahead
and exhibit initiative on its own part. That will give you a very
uneven service, because the States will not come up to any particular
level. When the Vocational Board started in, the States knew nothing about vocational education, but now they have reached a point
where they get remarkable results.
Senator TYSON. As a matter of fact it is largely a matter of education during a continuity of service?
Doctor COMMONS. The Federal service should be made up of what
we call experts. I think the vocational educational service is. I t is
highly specialized, and a highly informed service, of supervision,
inspection, and contingent aid.
On the matter of regularization, this proposition that I am placing before you, I want to repeat it is not an insurance system at all,
and it should not be called an unemployment insurance. The proper
name is unemployment reserve funds, leaving it to the business firms
to decide for themselves whether they will form mutual insurance
companies which would be necessary in the case of small firms, but
emphasizing mainly the promotion of reserve funds by establishment. I n other words, it looks upon labor as a kind of fixed charge
on industry, and it is in line with many things that are being done
in the past 15 or 20 years.
We have now a very remarkable development, which did not characterize the business of 15 or 20 years ago, of reserves for dividends,
so that the stocks of the companies are made almost equal to a bond,
not because there is any legal obligation, but because they set aside in
good times adequate reserves to pay dividends when there is no work,
and then we have reserves now for depreciation, or even for new
construction, keeping up the plant, and expanding the plant. This
proposition means that labor shall be treated in the same way, that
a reserve for unemployment shall be created, and in the Huber bill
it is provided that every firm that takes on a new man thereby incurs
a liability for unemployment and becomes obligated, in order to
maintain its financial standing to set up reserves to meet that liability. Take the period of 1919-20, when business, without any
regard to the future, was overbidding for labor. Labor was not
only fully employed, but firms were taking labor from each other by
excessively high wages. That resulted in the demoralization of
labor. The most inefficient period was the years 1919-20. The falli n g off in hourly output per man was .something demoralizing to
labor. Labor laid down on the job. Then within a year four o r



live million laborers were unemployed, so that they demoralized
them first, and then pauperized them afterwards. This means that
in periods of activity firms will not expand beyond what the credit
situation would seem to indicate. The taking on of new men and
the creating of new liabilities must bring the attention of commercial banks to the situation, as to whether the business is expanding
too much, so that this proposition of unemployment reserve funds
falls in line with other devices for stabilizing of production and
Of course, the most important one in the whole country is the
Federal reserve system, which, after 1920-21, has used its powers very
successfully toward stabilizing industry as a whole. I t may be that
they have taken pretty good care to ^stabilize the totality of industry,
but that is not written in the statue. There is no duty on the part
of the Federal reserve system to stabilize prices or production. They
have assumed that to be, and all of their actions in the last six years
indicate that they recognize that as a responsibility of the concerted
action of the banking interests of the country. This then falls in
with the general stabilization program which is interesting all classes
of people.
Here is another thing about labor. Somebody has to pay the bills
for unemployment. The example to which I call your attention is
one that occurred in my home State. A nonresident corporation had
a plant in that State in a small town, and during the period of
1919-20 they expanded to the extent of something like 3,000 employees. Their ordinary establishment was about 2,000. They brought in
3,000 people, paid them high wages, pulled them away from the farms,
brought them in from other States, and then suddenly in 1921
they laid them off, 5,000 people, and they were placed on that small
town without any notice or any provision of any kind, and the taxpayers of that town had to support them. These people had been
taken from different parts of the States; they had been pulled away
from agriculture. The taxpayer simply must support these people.
This simply means that the business management shall assume that
responsibility, that they will not overexpand with the certainty of
laying off people.
There are other forces leading toward stabilization. Much more
important as the financial inducement to employers is, of course, the
fixed overhead charges I have already mentioned, the care for stockholders, the care for reserves of different kinds, and then the overhead charge, which is a larger item than these rather small employment reserve funds. Take, for example, the Chicago market. The
reserve to be set aside by the employers there was iy2 per cent on the
pay roll. That is a very small item. I n 1928 they raised it to 3 per
cent, to which the laborers added Vfa per cent. Four and one-half
per cent is not a large item to attach to a pay roll in order to provide
unemployment relief. If it were larger than that we could show a
much greater influence of this particular scheme toward stabilizing,
for, you see, according to the devices that I have named, the firm that
stabilizes its work stops the payment on its fund. If its fund is
large enough so that it does not need to make any more payments, it
has those payments for dividend purposes. One firm, like Hart,
Schaffner & Marx, accumulated a fund which if they could stabilize




employment in their service would amount to a reduction of theii
expenses of about $200,000 a year, and if that was distributed in dividends, which they would be if the reserve fund were built up, it
would make quite an item in the dividend.
Senator TYSON. Did you mean dividends to the employees?
Doctor COMMONS. T O the stockholders, corporate dividends. That
is, having built up a fund in good times then it is so arranged that
they stop paying. I n the English system, or in the insurance systems of Europe, the more properous employers are continually bearing the burden, so in Europe the insurance system is the penalty of
stabilization. This idea of unemployment reserve funds is a premium
on stabilization. The firm that stabilizes reduces its expenses by
not having to build up its fund, as Mr. Leeds showed in his statement. By stabilizing they have a rule there that once they have accumulated a fund equal to two months' pay of their pay roll, they
stop paying.
The CHAIRMAN. YOU mean stop paying into the fund ?
Doctor COMMONS. Stop paying into the fund. I mentioned one
firm in Chicago that has stabilized, giving about 50 weeks' employment. Its fund accumulated adequately so that it has not been paying any premiums into the fund for a year or two.
I want to just mention this, bearing on the three kinds of unemployment that we are familiar with, the seasonal unemployment, the
cyclical unemployment, and what we are now learning to call the
technological unemployment. I have illustrated it sufficiently in Chicago as to the seasonal employment. They have added the cyclical
feature in the Chicago market within the last year. They .do not
pay the full benefits in the year when there is good employment,
as in the last year, 1928, when had a good employment up to 40
weeks on the average instead of 35, but they set aside a reserve,
which may be accumulated on the succeeding year, when they are
not so successful in their employment or production, so that when
the cycle comes around they can give additional employment.
Then a new thing that has come on within the last five or six years
is the technological unemployment. There has been this enormous increase in efficiency, and where they have had labor cooperating, it has
in the last few years in the Chicago market amounted to 40 per cent
increase in efficiency. I n the last three years consequently the Chicago
market, although it has increased its sales—and I am speaking now
of one firm—by 50 per cent, at a reduction of about 25 per cent in
price of suits to the customer, and the reduction of about 25 per cent
in the number of employees, they have had to lay off about 25 per
cent of their employees. I n that case, it is pretty nearly a thousand
people that were laid off on account of the technical improvements
which the employees themselves helped to bring about. That is what
I call technological unemployment. T h a t is a serious matter. If we
consider the different things that happen, it amounts to this. A
large number of these employees drop out for sickness or death
or leaving the industry. Of course that reduces the number employed. Then where the technical improvement comes too rapidly
for either the expansion of markets or for the voluntary quits on
the part of the employees, some provision must be made for laying
off an additional number, in order that those who remain on the
force may have steady employment.



I n the Chicago market they reached that crisis in the case of the
cutters, a skilled trade. I n one firm they had about 600 cutters,
and now under the new devices they have reduced the number of
cutters to 250. That makes a reduction of 350 cutters, although the
output has increased 50 per cent. About 200 of these cutters had
voluntarily quit. There were 150 that were still on the force, but
they could not give steady employment to 4.00 cutters. So they
added this feature to the unemployment reserve fund system. They
actually paid these 150 cutters $500 each, of which the firm contributed the largest part, and the employees contributed in this way.
They agreed not to receive unemployment benefits. They turned
their unemployment benefits over to those 150 cutters, who were,
you might say, bought off, and induced to leave the business* entirely
through this technical improvement. The unemployment reserve
fund then, if they are going to take care of this technological unemployment, should have some provision, and it automatically follows that if they have a provision for unemployment, they will get
it when laid off through technical changes, reducing the force in
order that the others may have steady employment—in order that
those who are thus laid off through technological changes might
find other occupations that they can go into. Of course that takes up
the whole question as to whether industry as a whole in this country
is expanding and new industries are coming in.
That is a question that belongs, I should say, to the Federal reserve system, which has more responsibility on that subject than any
one else, as to whether it maintains an even level and thus encour
ages new industries to come in and take up these people who are
unemployed. But during this process what happens is that, through
this unemployment reserve fund, with possible accumulations for
cyclical and for technological unemployment, the purchasing power
of labor is maintained to a certain extent, as far as it goes, and not
in a general way would support the purchasing power of labor,
which otherwise through unemployment would not be available.
What effect the unemployment provision has had in the Chicago
market, and that is the only test I know of, and it has been in operation for six years, when you have these other inducements for stabilization, it is difficult to say. I have tried to find out from the Chicago
market in the last week what the opinion of the people in industry
is as to the effect which this unemployment reserve fund might have
had toward inducing the management to stabilize employment, to
spread out the employment over the years, and they can not separate
it from the other forces which are inducing employers to stabilize
their production. They can only say this, that they would not have
been able to go ahead with this enormous increase in efficiency if they
had not had this system which puts the employees in a frame of
mind to be willing to cooperate with them. I t was an essential part
of the whole system.
But when it gets down to working out the actual details of the
enormous amount of detail work which must be put through in order
to increase the output of a suit of clothes, which is not subject to
any concrete, dramatic invention, but is a matter of minute detail
on each seam and each part of a suit, their minds are so occupied
with those details that that is the main thing that they are working



for, and it is difficult for them to say that this rather small unemployment reserve fund which they have put up has had very much influence in inducing them to stabilize employment, because there are so
many agencies cooperating and leading toward the same effect. This
unemployment reserve fund is simply supplementary, parallel to all
of the other things which are leading business nowadays to bring
about a better regularization of production, and, of course, that
means of employment.
I t brings attention to one of the neglected factors in the whole
scheme. We want to stabilize the dividends of stockholders and thus
make stocks a better investment. They are almost as good as bonds,
owing to this reserve policy. We want to stabilize production by
not overexpanding, and then dropping off. But the attention of the
business men and the public, except for a very small number of
firms, has not been directed toward doing the same things for their
employees that business indicates it should do for its stockholders
and for depreciation and construction of plants. So that I look upon
it as a necessary inducement to all business firms to pay attention
to the labor side of their stabilization policies, and it should not be
a very large sum that they should pay. I n the Huber bill we made
it $1 a day.
Senator TYSON. A dollar for what?
Doctor COMMONS. A dollar a day for 13 weeks. I t should not be
large, because the employees must not be led to believe that they
can live on the unemployment relief. They must hunt jobs, and
it is their duty to accept the jobs. We see the great evil in England
where under their system the employees can support a family almost
on the unemployment dole. The Government has had to come to
help of the unemployment funds there, because they had to keep
these million workers alive.
Senator TYSON. D O you think they are coming to a change of tht>
dole in England?
Doctor COMMONS. N O ; I do not. They just have not the employment ; the industries have fallen off.
Senator TYSON. When you have unemployment to the extent that
you have in England, you have to raise your dole.
Doctor COMMONS. I would not do that out of the insurance fund.
I would say that the Government has to come to their aid. That
is what happened in England. The insurance fund would have
been bankrupt, but the Government during this period of unemployment has gone directly to the taxpayers and has added a new system
which they call the dole.
Senator" T Y S O ^ . A S I understand you, do you think that this can
be applied to anything but the manufacturing industry? Most of
your ideas are along the line of unemployment in manufactures.
Doctor COMMONS. Yes; it can be applied everywhere.
Senator TYSON. Can it be applied in small business firms, where
the number of employees is limited, say, to 10 or 20 or 30 ?
Doctor COMMONS. When the firm has less than 50 employess, I
think it is advisable for them to form a mutual insurance association among the firms. That is the way we did in Sie Chicago market, with about 400 small firms. They have built up a mutual insurance, but that is not compulsory; it is optional.



Senator TYSON. The difficulty I see about this whole thing is the
Tery thing you are making a point of. When you get this insurance,
you make everybody more efficient and interested in his job.
Doctor COMMONS. Yes.
Senator TYSON. When a man gets more efficient he thereby puts
somebody out of employment.
Doctor COMMONS. Yes.
Senator TYSON. And thereby increases the very difficulty that we
are now trying to correct. Of course, as I see it, your idea is that
they have to go into something else, some other form of industry.
Do you think that we are going to go faster, so that we are going to
have new industries to absorb the increased efficiency and increased
population without any change in hours ?
Doctor COMMONS. I think that is going to depend upon the policy
of the Federal reserve system. If they adopt a policy which will
lead to a gradual falling in prices by high discount rates, and so on,
similar to the fall in prices in England, which is killing off their
industry, then I say that new industries will not start up and take
up the unemployment. If, however, they can establish what we call
a stable average purchasing power of money, so that we have indust r y stabilized, then I think that new industries will be entirely adequate to take up the slack of those laid off on account of these technical improvements. I have testified on that subject on House bill
11806, and that is covered quite fully in that testimony.
Senator TYSON. Then you think it is necessary for the Federal
Keserve Board to keep a low rate of discount so that money can be
made cheap ?
Doctor COMMONS. The rate of discount must be flexible.
Senator TYSON. And must not be very high.
Doctor COMMONS. I t depends on how business is going. If business is expanding too rapidly—and I am not talking about the stock
market, but manufacturing and commerce
Senator TYSON. But the difficulty is that the stock market has
such an effect on the Federal reserve that it apparently can not keep
i r o m raising rates in order to try to control the situation.
Doctor COMMONS. We always have to remember this
Senator TYSON. If you will permit me, I think this is a very
pertinent proposition, because I think they are interconnected in such
a way that if you do not have reasonable rates for money you are
certainly not going to have much expansion in business.
Doctor COMMONS. I notice that Chairman McFadden, of the committee before which I appeared last spring, has given out a statement
within a day or so—and I quite approve of his statement—that the
Federal reserve system should not pay attention to the stock markets, but should pay attention to the commodity market, and if in
order to kill off speculation in the stock market it has to raise the
rates in such a way that it will eventually spread into the commodity
markets, then its policy is bad. I could not pass judgment on what
they are doing now, but I do think this. The statement given out
by the Federal reserve system is quite accurate. They say their
attitude to commerce and industry is that of furnishing them facilities to conduct business; the stock market is subordinate.



They may have made a mistake in going after the stock market
too heavily, but you have to remember this, that always when money
is easy, it is going to affect the stock market first, and it has to filter
through the stock market into the commodity market. Then, another
thing. I am not so much alarmed about the stock prices going up.
First, the companies who have done this stabilizing of their dividends, have made their stocks so that they are worth far more than
they ever were, and the stock yield is now even below the bond yield.
Senator TYSON. But we have had the most scientific management
that we have ever had up to now.
Doctor COMMONS. Then also, the statement of these companies
whose stocks have risen so high, almost justify the prices which have
been paid for them.
The CHAIRMAN. T O make a concrete case, how do you explain,
when you say that stabilization of dividends has made the stocks
more valuable, that the Radio Corporation with no dividends has
run up in the price of its stock to such an unreasonable figure.
Doctor COMMONS. There are two kinds of dividends, the income
dividend and the stock dividend. The stock dividend is a claim on
future income, and those things may have come in to affect it. There
may be a big reserve that has been set aside, not declaring dividends,
but something they are going to have sometime in the future, and it
is a big asset that the company has built up by its new policy of not
paying out dividends. That is what this means, that by setting
aside an unemployment reserve fund it reduces slightly the amount
that can be declared in dividends, because it is another fund thatmust be taken care of as a fixed charge before they declare dividends.
Then, if you analyze these stock prices you will find that the active
stocks are less than 200, all of which show enormous increased earnings. I have averaged those stocks with the 2,000 listed stocks, and
there is no such inflation in the others.
The CHAIRMAN. I n other words, you think there are a great many
stocks that are not inflated?
Doctor COMMONS. I would not like to say definitely, but such as I
have looked at and have seen their statement, I would say are worth
the money that is being paid for them. That can go too far, but,,
considering the stability of dividends that is a proposition that they
provided for and the enormous increase in net earnings which they
have for future dividends of some of these active stocks—15 or 20'
that I could name—I think fully justify the prices as compared with
what people can get by investing in bonds or in commerce. But
I would not want to say to that extent, more than 5 per cent of the
whole industry of the country, because so many corporations are
not showing that statement at all. I t is a few of the highly efficient ones. I myself do not see any reason for being disturbed about
what the stock market does, and if the reserve system, being scared
about the stock market, starts in to depress those prices, it is liable
to spread to commerce, and that will not show itself until there is a
demand for more money, as the spring business opens up and the
farm, crops begin to move, and if they can not take another turn
before that time arrives it will spread to the rest of the industry of
the country.





The H a r t Schaffner & M a r x unemployment fund is a development of the
system of relationship between the company and its employees, beginning in
1911 with the establishment of a permanent board of arbitration or industrial
court, and an agreement or industrial constitution administered by a labor
department. The system h a s developed and spread in the clothing industry
as a definite institution.
T h e most important a n d novel feature of this system is the voluntary giving
u p by both management and union of t h e final determination of any disupted
matter. The final determination of any m a t t e r of m u t u a l concern is delegated
to the board of arbitration and its decisions become t h e law, the governing
power in the industry, which both parties a r e pledged to support.
The Amalgamated Clothing Workers of America have adhered for 13 years
to this principle of the rule of law.
The clothing industry is seasonal, due to the buying habits of the retailers
and consumers and t h e rapid style changes. This fact accounts for most of the
labor problems of the industry a n d the conditions now e x i s t i n g : Comparatively high wage rates, high labor cost, difficulties of administering t h e piecework system, a t t e m p t s to limit the hiring right of t h e employer, and periodical
problems because of short-time a n d layoff.
The hectic prosperity of 1919 raised the s t a n d a r d of expense among t h e
workers, impaired their habits of thrift, a n d left them peculiarly unprepared
for the depression which so suddenly descended upon t h e i n d u s t r y in 1920.
T h a t situation forced t h e attention of the whole country to t h e question of
unemployment. I n our case it stimulated both the company and the union to
redoubled thought and planning, the result of which is t h e unemployment fund.
The plan accomplishes to a degree for the worker w h a t a dam does for t h e
w a t e r supply of a c i t y ; it changes an irregular a n d varying flow of income into
a more regular and uniform stream of purchasing power. It distributes t h e
burden of unemployment more equally over the group of workers and requires
t h e employer and t h e workers to contribute equal amounts for the purpose.
T h u s for every dollar t h e worker puts in on t h e average, he will d r a w out two
and at the time when the utility value of a dollar is multiplied manyfold.
The unanimous selection of Prof. John R. Commons of the University of Wisconsin a s t h e first c h a i r m a n of the four Chicago boards of trustees is peculiarly
appropriate. H e is undoubtedly by study and experience the foremost authority
on t h e subject in t h e country. T h e other members of t h e board of trustees of
the H a r t Schaffner & M a r x unemployment fund a r e ; For t h e A. C. W. A.,
Sidney Hillman, national p r e s i d e n t ; Bryce N. Stewart, m a n a g e r employment
department. For H a r t Schaffner & Marx, Milton A. Strauss, general m a n a g e r ;
E a r l Dean Howard, labor manager.

Memorandum of Agreement, made this 3d day of October, 1923, by and between H a r t Schaffner & M a r x (Hereinafter called t h e " M a n u f a c t u r e r " ) ,
P a r t y of the F i r s t P a r t , and the Amalgamated Clothing W o r k e r s of America
(Hereinafter called the " U n i o n " ) , P a r t y of the Second P a r t ; W i t n e s s e t h :
Whereas an agreement h a s heretofore been entered into between the manufacturer and the union with reference to wages a n d working conditions; a n d
similar agreements have been entered into between the union and certain
other clothing m a n u f a c t u r e r s in Chicago; a n d
Whereas it is contemplated t h a t agreements similar to this one will be
entered into between the union and other clothing m a n u f a c t u r e r s in Chicago;
and the parties hereto a r e desirous of mitigating the effects of unemployment:
Now therefore, in consideration of the premises a n d of the m u t u a l covenants
herein contained, it is agreed by and between the parties hereto as follows:
ARTICLE I. T h e union agrees to use its best efforts to cause each of its
members employed by the manufacturer ( a ) to pay to t h e board of trustees,
hereinafter constituted, for each pay-roll week, commencing with the pay-roll



week beginning on or immediately following May 1, 1923, 1% per cent of the
amount of such employee's wages received from the manufacturer, and (b)
to authorize and direct the manufacturer to deduct such sums from the contributing employee's wages and forthwith pay the sums so deducted to the
board of trustees on behalf of such contributing employees.
The manufacturer agrees to make the deductions so authorized and to pay
over the sums so deducted to the board of trustees on behalf of such contributing employees and the manufacturer agrees to pay to the board of
trustees an amount equal to each such payment so contributed by such
employees as and when such contributions are made by the employees.
ABT. II. All sums so received shall be held by the board of trustees in trust
subject to all the terms and conditions of this agreement, and such sums and
the income therefrom shall be held as a special trust fund, designated as the
" Unemployment fund," hereinafter referred to as the " Fund."
ART. III. Each contributing employee shall receive unemployment benefits
from the fund, as hereinafter and in Schedule A hereto annexed provided.
ART. IV. No right or interest of any contributing employee acquired by
virtue hereof,' can be assigned, transferred, alienated, hypothecated, or bartered
away, directly or indirectly, or be subject to attachment, garnishment, execution, sequestration, seizure, or other process. The board of trustees may,
however, pay any benefits to which a deceased contributing employee might
hav£ been entitled, to such person or persons as the board shall in its absolute discretion determine, and no heir, next of k<n, legal representative, creditor,
or claimant of any such decedent shall have any right or claim to any such
ART. V. Neither the manufacturer nor the union shall have any right, property, or interest in the fund. Nor shall the fund be subject to attachment,
garnishment, execution, sequestration, seizure, or other process by reason
of any claim on behalf of any person whatsoever against either the manufacturer or the union, or against any contributing employee.
ART. VI. The manufacturer and the union agree at all times during the
continuance of this agreement to keep such records as may be necessary for
the proper administration of the fund (which records shall, at all reasonable
times, be available and open to the inspection of the board of trustees or
its accredited representatives), and also to provide the board of trustees with
such information and records as it may require for the proper performance of
its duties, it being the intention hereof that there shall be as little duplication
of work as possible and that the existing records of the manufacturer and the
union will be used with a view of having said fund administered with the least
possible expense to the fund, the manufacturer, and the union.
ART. VII. This agreement shall terminate on April 30, 1925, unless the same
shall be renewed or extended prior to that time. If a new agreement is entered
into, and any part of the fund shall then be undistributed, such fund shall
be transferred by the board of trustees to such person or persons, or body,
as under such new agreement shall be entitled thereto.
If no new agreement is entered into, then upon the termination of this agreement, by lapse of time, or in any other way, the payments herein provided
to be made to the board of trustees shall cease, but the entire amount then
remaining in the fund shall be distributed by the board of trustees as unemployment benefits to the persons who were contributing employees at the
time of such termination in the manner provided herein, and subject to the
terms and conditions hereof, to the extent that such terms and conditions are
applicable within five years from the date of such termination of this agreement.
If the manufacturer shall, prior to April 30, 1925, cease to carry on business
by dissolution, winding up or in any other way other than by sale, merger,
or consolidation, and, as a result thereof, any of the contributing employees
of the manufacturer shall be transferred to or employed by any other manufacturer who shall have entered into an agreement similar in character to this
one, the same provisions, rules, and regulations shall be applicable as are
effective in the event of the transfer of a contributing employee during the
period of this agreement.
After making provision for such' contributing employees out of said fund
the remainder of said fund shall be distributed by the board of trustees by way
of unemployment benefits among members of the union actually employed in
the industry in Chicago, 111., the manner in which such distributions shall be
made and the time or times when they shall be made being left to the sole
discretion and judgment of the board.



It is expressly agreed, however, that the entire amount of such fund shall
be disposed of either by transferring the same to other unemployment funds
created by agreement between the union and other manufacturers in Chicago,
or by distribution as unemployment benefits among contributing employees
in the industry in Chicago within five years from the date when such manufacturer ceases carrying on business.
A sale of the entire business of the manufacturer resulting in the continuance
of the business under different ownership, or a merger or consolidation of the
manufacturer with any other person, firm, or corporation, shall not be deemed
a cessation of carrying on business by the manufacturer within the meaning
hereof, but in such event the purchaser or the merged or consolidated business
shall for all purposes of this agreement be substituted for the manufacturer
The board of trustees shal,l not pay any part of the fund to any one other
than the contributing employees, unless in case of cessation of business, as
above provided for, and the maximum amount payable to any contributing
employee shall never exceed the sum of $100 in any one year, and at no time
shall any distribution of any part of said fund be made which shall, directly
or indirectly, aid, assist, or encourage the carrying on of any .labor warfare or
controversy, or for the purpose of relieving unemployment which directly or
indirectly results from strikes or stoppages of work, or arises out of any conflict
or warfare between employees and employers, or their representatives, nor
shall any sums at any time be paid or distributed to any employees who at
the time of such unemployment are engaged in or parties to any strike, stoppage
of work or other form of labor warfare or controversy.
ART. VIII. If any law or ordinance is passed compelling the manufacturer to
contribute to any Federal, State, or municipal unemployment fund with reference to any contributing employees hereunder, the contributions of the manufacturer hereunder shall be reduced by the amount which the manufacturer is
compelled to contribute to such Federal, State, or municipal unemployment
fund. If the contribution which the manufacturer is compelled to make to any
such fund is equal to or greater than the contribution required of the manufacturer hereunder, then the obligation of the manufacturer to make contributions hereunder shall cease, and in such event the fund shall be disposed of in
the same manner herein provided for disposition at the expiration of this
ART. IX. It is expressly understood and agreed that the fund shall never
(except as hereinafter in this paragraph provided) be permitted to accumulate
beyond an amount equal to the total maximum unemployment benefits which
would be payable during a period of two years to all of the then contributing
employees of the manufacturer. Whenever the fund reaches such maximum
amount the obligation of the manufacturer and of the then contributing
employers to make further payment shall be suspended, but such suspension
shall not apply to such employees as have not contributed during the period
of one full year. Payments to said fund shall only be revived when the fund
is again reduced to an amount less than the total maximum benefits which
would be payable during a period of one year to all of the then contributing
employees of the manufacturer.
ART. X. Al,l funds contributed by the contributing employees since May 1,
1923, and the corresponding amount contributed by the manufacturer or which
should have been contributed by the manufacturer from May 1, 1923, to the
date of the actual execution of this agreement shall immediately be turned
over to the board of trustees.
ART. XI. Any questions which may arise out of the interpretation or performance of this agreement which involve, directly or indirectly, the interpretation, or performance of the agreement between the parties with reference to
wages and working conditions shall be determined solely by the instrumentalities provided for by said agreement, and such determination shall be binding
and conclusive upon the parties hereto, the board of trustees and the contributing employees. It is the intention hereof not, to affect in any particular the
jurisdiction, powers, rights or duties of the instrumentalities functioning under
sai#d agreement relating to wages and working conditions.
ART. XII. (a) The manufacturer and the union shall each appoint not exceeding three trustees (each to appoint an equal number), who shall hold office at
the will of the appointing party. In addition to the trustees thus selected John
R. Commons, of the University of Wisconsin, of Madison, Wis., is also hereby
designated as a trustee and as chairman of the board of trustees. The number
of trustees may be changed from time to ti-rte by the joint act of the manu



facturer and the union, but there shall not at any time be less than three trustees, nor more than seven, and the number of trustees shall be at all times odd.
The manufacturer and the union shall at all times each be represented on said
board by their respective appointees, and each shall at all times have equal
representation on said board. There shall always be a chairman of the board
of trustees who shall be selected by the manufacturer and the union, and who
shall not be removable except by the joint act of the manufacturer and the
union. Any trustee may at any time resign from the trust hereby created by
giving written notice of such resignation personally or by mail, addressed to
the last known post-office address of the remaining trustees. Should any of
the trustees designated by the manufacturer die, resign, become incapacitated
or unable or unwilling to act or be removed, the vacancy so occurring shall be
filled by the appointment of a successor to be named by the manufacturer.
Should any of the trustees designated by the union die, resign, become incapacitated, or unwilling to act, or be removed, the vacancy so occurring shall
be filled by the appointment of a successor to be named by the union. All trustees appointed to fill any vacancy hereunder shall be vested with all the rights,
powers, and duties herein and hereby vested in their predecessors. Should the
chairman of the board of trustees die, resign, be removed, become incapacitated,
unable, unwilling, or fail for any reason to act, then the vacancy so occurring
shall be filled by the appointment of a successor named by the manufacturer
and the union, and if they are unable to agree upon such successor within a
period of 30 days, such vacancy shall be filled by the appointment of a successor
designated by Judge Julian W. Mack and/or Judge Samuel Alschuler.
Until the appointment of a successor chairman of the board to fill such
vacancy, the remaining trustees shall exercise all of the powers and perform all
of the duties of the board of trustees. The appointment of any trustee hereunder shall be in writing delivered to the remaining trustees, or their successors.
If all of the trustees designated by the union or by the manufacturer, as the case
may be, shall riot be present at any meeting of the trustees, the trustee or
trustees designated by the manufacturer or union, as the case may be, present at
such meeting, shall be entitled to cast as many votes or the same number of
votes as the trustees designated by the other party present at said meeting shall
be entitled to cast, it being the intention hereof that at any meeting of the
trustees, regardless of the number present, the trustees representing the manufacturer and the trustees representing the union shall have equal voting power.
(6) All questions that may arise or come before the trustees shall be determined by the affirmative vote in person or by proxy of a majority of the'
trustees. Such vote may be given in meeting assembled, or by a writing signed
by the trustees, or by a majority of them, provided such writing is signed by one
or more trustees designated by the union, and one or more trustees designated
by the manufacturer, and such decision or act of a majority of the trustees shall
be binding and conclusive upon the parties hereto, the board of trustees and
the contributing employees. Any trustee may act by proxy. Any trustee may
call a meeting of the board of trustees by giving at least five days' notice in
writing of the time of holding of such meeting and having a copy thereof personally delivered to each trustee, or by mailing the same, postage prepaid, to the
last known address of each trustee. Meetings of the board of trustees may be
held at any time, without notice, if all of the trustees consent hereto.
(o) None of the trustees, other than the chairman of the board of trustees,
shall be entitled to compensation hereunder. The compensation of such chairman shall be fixed by the manufacturer and the union and shall be paid out
of the fund.
(d) The board of trustees shall have power to employ at such compensation
as they may fix, agents, representatives, accountants, experts, and attorneys,
and such other appropriate instrumentalities to assist it in the proper administration of the fund as to it shall seem advisable.
(e) The principal and interest of the fund, except such amounts as shall
be required for current purposes, shall be invested by the board of trustees in
direct obligations of the United States Government, and not otherwise. All
moneys not so invested shall be deposited in substantially equal amounts in
two or more clearinghouse banks located in the city of Chicago, or in banks
which are members of the Federal reserve system.
(f) The board of trustees shall keep true and accurate books of account and
records which shall be audited by certified public accountants at least twice
in each year.
iff) Each of the trustees shall be protected in acting upon any notice, request, consent, instruction, certificate, affidavit, resolution, opinion, receipt,



application or other paper or document believed by him to be genuine, and to
Jiave been made, executed or delivered by the proper party or by the proper
authority, or authorities, of the union or manufacturer, as the case may be, or
by the party or parties purporting to have made, executed, or delivered the
same, and shall be protected in relying and acting upon the opinion of legal
counsel in connection with any matter pertaining to the carrying out of this
(h) Neither the trustees, nor any of their successors, shall be liable or
responsible in respect to any action taken or omitted to be taken pursuant to
any vote cast by the trustees, or any of them, or any proxy or proxies appointed hereunder, nor shall the trustees or any successor or successors, be
liable for any loss occasioned by any act of commission or omission done
or omitted to be done in good faith by them, or any of them, or of any proxy
or proxies that may be appointed hereunder, nor for the acts of any agent,
attorney, or employee selected with reasonable care by them, or any of them,
nor shall any trustee be liable for any act of omission or commission of any
mother trustee, or of any proxy or proxies, that may be appointed hereunder.
(i) The board of trustees shall permit the duly accredited representatives
of the manufacturer and the union, at all reasonable times during business
hours to examine the books and records kept by it hereunder.
(/) The board of trustees shall have the power and authority to make
reasonable rules and regulations, not inconsistent herewith, to carry out the
provisions of this agreement, and shall have the right to make and adopt their
own rules of procedure and action.
(fc) The board of trustees shall be entitled to incur reasonable expenses
for the purpose of carrying out the provisions of this agreement, which expenses shall be payable out of the fund.
ART. XIII. Whenever the trustees or board of trustees are referred to
herein, it is intended that such term shall include the trustees or board of
trustees for the time being in office. This agreement and the terms and
conditions of the trust hereby established may be modified at any time by the
board of trustees, upon its obtaining the written consent of both the union and
the manufacturer.
ART. XIV. This agreement may be extended or renewed by the joint written
consent of the manufacturer and the union.
ART. XV. The trustees designated by the manufacturer and the union and
the chairman of the board of trustees, from time to time designated hereunder,
.shall evidence their acceptance of the trusts hereby created by executing this
agreement, or a duplicate thereof, and by such execution shall agree that they
will in good faith and in all respects exercise the powers granted to them
In witness whereof the parties have caused this instrument to be duly
executed the date first above written.





(1) The contributing employee must have made contributions regularly during
Iiis employment; in addition, he must have been a member of the union in good
standing since May 1, 1923, up to and including the date when he shall apply
for benefits, or, if he were not a member of the union on May 1, 1923, then he
shall be eligible for benefits after one year from the4 date of his first contribution.
(2) In no case shall a contributing employee receive more than an amount
-equal to five full weekly benefits in a single year; always provided, however,
that there shall be no benefit payment made hereunder unless there are moneys
in the fund available for the purpose.
(3) It is agreed that benefits shall be paid only for such involuntary unemployment as results from lack of work, and that no benefit shall be paid to
an employee who voluntary leaves his employment or to an employee who is
discharged for cause or who declines to accept suitable employment.
(4) It is agreed that no benefits shall be paid or distributed for unemployment that directly or indirectly results from strikes or stoppages or any cessation of work in violation of the trade agreement now in force between the



manufacturer and the union; nor shall any benefits at any time be paid or
distributed to employees who at the time are engaged in strikes or stoppages or
who have ceased work in violation of said trade agreement.
(5) A contributing employee who has voluntarily interrupted the regularity
of the payment of his contributions shall not receive benefit out of the fund
in excess of one full weekly benefit for every ten full weekly contributions
in a single year.
(6) In complete unemployment the contributing employee shall promptly
register with the employment exchange, and such unemployment shall be
deemed to begin on the date of such registration.
(7) Contributing employees who are entitled to unemployment benefits
under this agreement, and the rules and regulations adopted by the board of
trustees in pursuance hereof, shall receive out of the Fund unemployment benefits at the rate of 40 per cent of the average full-time weekly wages of said
contributing employee, but in no case in excess of $20 for each full week of
(8) The payments of benefits from the fund established hereunder shall
begin no earlier than January 1, 1924, nor later than May 1, 1924. The date
on which such payments shall begin shall be determined by the board of
trustees, and benefits hereunder shall be payable only for unemployment occurring subsequent to said date.
(9) An advisory committee, composed of representatives of the parties
hereto, w:th the aid if desired of an outside expert to be selected by them
jointly, shall submit to the board of trustees not later than October 15, 1923,
or from time to time thereafter if requested by said board, recommendations
for rules and specifications concerning records required to be kept by the
manufacturer, the union, and the trustees, in order to insure the efficient
and economical administration of the fund.
Said committee shall also submit recommendations before said date (and
from time to time thereafter if requested by the board) to the board of trustees
for rules and regulations relating to the transfer of contributing employees from
one manufacturer to another, the return to employment of contributing employees temporarily withdrawing from the industry, the proper basis of calculating benefits in the case of short time employment, the proper reduction of unemployment or short time employment because of overtime employment of contributing employees, the proper limitation to be placed upon the amount of weekly
benefits to be received by any contributing employee during any one season of
unemployment, a proper waiting period between the beginning of unemployment
in any one season and the accrual of weekly benefits hereunder, and other matters of like character upon which the board desires recommendations.
It is understood and agreed that the board of trustees shall have power tomake rules and regulations not inconsistent with the terms of this agreement on
the matters aforesaid, but shall only do so after proper investigation and
examination of the recommendations submitted by the aforesaid advisory committee, it being the intention hereof that before mak ng said rules and regulations the parties hereto shall have had full and ample opportunity to make
necessary investigations and present to the board the conclusions and suggestions resulting therefrom.
In the event, however, that said advisory comm'ttee does not make its report
on or prior to October 15, 1923, said board of trustees shall have the power, if it
deems advisable, to request a report on any one or more of the aforesaid matters
by the committee, or separate reports by the representatives of either party on
said committee, by a day certain; and in the event that said reports and recommendations are not forthcoming may proceed to make on its own behalf any
investigations that it deems proper and formulate any rules and regulations it
deems advisable under the circumstances.

Memorandum of agreement, made this
day of
, 1928, by and
(hereinafter called the manufacturer), party of the
first part, and the Amalgamated Clothing Workers of America (hereinafter
called the union), party of the second part;
Whereas an agreement has heretofore been entered into between the manufacturer and the union with reference to wages and working conditions; and



similar agreements have been entered into between the union and certain other
clothing manufacturers in Chicago; and
Whereas it is contemplated that agreements similar to this one will be entered
into between the union and other clothing manufacturers in Chicago; and
the parties hereto are desirous of mitigating the effects of unemployment,
Now, therefore, in consideration of the premises and of the mutual covenants
herein contained, it is agreed by and between the parties hereto as follows:
ARTICLE I. The union agrees to use its best efforts to cause each of its members employed by the manufacturer (a) to pay to the board of trustees,
hereinafter constituted, for each pay-roll week, commencing with the pay-roll
week beginning on or immediately following May 1, 1928, 1% per cent of the
amount of such employee's wages received from the manufacturer, and (b) to
authorize and direct the manufacturer to deduct such sums from the contributing employee's wages and forthwith pay the sums so deducted to the
board of trustees on behalf of such contributing employees.
The manufacturer agrees to make the deductions so authorized and to pay
over the sums so deducted to the board of trustees on behalf of such contributing employees and the manufacturer agrees to pay to the board of trustees
3 per cent of the amount of such employees' wages as and when the contributions are made by the employees.
ART. II. All sums so received shall be held by the board of trustees in trust
subject to all the terms and conditions of this agreement, and such sums and
the income therefrom shall be held as a special trust fund, designated as the
" unemployment fund," hereinafter referred to as the " fund."
ART. III. Each contributing employee shall receive unemployment benefits
from the fund, as hereinafter and in Schedule A hereto annexed provided.
ART. IV. No right or interest of any contributing employee acquired by
virtue hereof, can be assigned, transferred, alienated, hypothecated, or bartered
away, directly or indirectly, or be subject to attachment, garnishment, execution, sequestration, seizure, or other process. The board of trustees may,
however, pay any benefits to which a deceased contributing employee might
have been entitled, to such person or persons as the board shall in its absolute
discretion determine, and no heir, next of kin, legal representative, creditor,
or claimant of any such decedent shall have any right or claim to any such
ART. V. Neither the manufacturer nor the union shall have any right, property, or interest in the fund. Nor shall the fund be subject to attachment,
garnishment, execution, sequestration, seizure, or other process by reason of
any claim on behalf of any person whatsoever against either the manufacturer
or the union, or against any contributing employee.
ART. VI. The manufacturer and the union agree at all times, during the
continuance of this agreement, to keep such records as may be necessary for
the proper administration of the fund (which records shall at all reasonable
times be available and open to the inspection of the board of trustees or its
accredited representatives), and also to provide the board of trustees with such
information and records as it may require for the proper performance of its
duties; it being the intention hereof that there shall be as little duplication of
work as possible and that the existing records of the manufacturer and the
union will be used with a view of having said fund administered with the least
possible expense to the fund, the manufacturer, and the union.
ART. VII. This agreement shall terminate on April 30, 1931, unless the same
shall be renewed or extended prior to that time. If a new agreement is entered
into and any part of the fund shall then be undistributed, such fund shall be
transferred by the board of trustees to such person or persons, or body, as
under such new agreement shall be entitled thereto.
If no new agreement is entered into, then, upon the termination of this
agreement, by lapse of time, or in any other way, the payments herein provided
to be made to the board of trustees shall cease, but the entire amount then
remaining in the fund shall be distributed by the board of trustees as unemployment benefits to the persons who were contributing employees at the time
of such termination in the manner provided herein, and subject to the terms
and conditions hereof, to the extent that such terms and conditions are applicable, within five years from the date of such termination of this agrement.
If the manufacturer shall, prior to April 30, 1931, cease to carry on business
by dissolution, winding up or in any other way other than by sale, merger, or
consolidation, and as a result thereof any of the contributing employees of the
manufacturer shall be transferred to or employed by any other manufacturer



who shall have entered into an agreement similar in character to this oner
the same provisions, rules, and regulations shall be applicable as are effectivein the event of the transfer of a contributing employee during the period of
this agreement.
After making provision for such contributing employees out of said fund, the
remainder of said fund shall be distributed by the board of trustees by way
of unemployment benefits among members of the union actually employed in
the industry in Chicago, 111., the manner in which such distribution shall be
made and the time or times when they shall be made being left to the sole
discretion and judgment of the board.
It is expressly agreed, however, that the entire amount of such fund shall
be disposed of either by transferring the same to other unemployment funds
created by agreement between the union and other manufacturers in Chicago,
or by distribution as unemployment benefits among contributing employees
in the industry in Chicago, within five years from the date when such manufacturer ceases carrying on business.
A sale of the entire business of the manufacturer resulting in the continuance of the business under different ownership, or a merger or consolidation of the manufacturer with any other person, firm, or corporation, shall
not be deemed a cessation of carrying on business by the manufacturer within
the meaning hereof, but in such event the purchaser, or the merged or consolidated business, shall for all purposes of this agreement be substituted for
the manufacturer.
The board of trustees shall not pay any part of the fund to any one other
than the contributing employees, unless in case of cessation of business, as
above provided for, and at no time shall any distribution of any part of said
fund be made which shall, directly or indirectly, aid, assist, or encourage the
carrying on of any labor warfare or controversy, or for the purpose of relieving unemployment which directly or indirectly results from strikes or stoppages of work, or arises out of any conflict or warfare between employees and
employers, or their representatives, nor shall any sums at any time be paid
or distributed to any employees who at the time of such unemployment are
engaged in or parties to any strike, stoppage of work, or other form of labor
warfare or controversy.
ART. VIII. If any law or ordinance is passed compelling the manufacturer to
contribute to any Federal, State, or municipal unemployment fund with reference to any contributing employees hereunder, the contributions of the manufacturer hereunder shall be reduced by the amount which the manufacturer
is compelled to contribute to such Federal, State, or municipal unemployment
fund. If the contribution which the manufacturer is compelled to make to
any such fund is equal to or greater than the contribution required of the
manufacturer hereunder, then the obligation of the manufacturer to make
contributions hereunder shall cease, and in such event the fund shall be disposed of in the same manner herein provided for disposition at the expiration
of this agreement.
ART. IX. It is expressly understood and agreed that the fund shall never
(except as hereinafter in this paragraph provided) be permitted to accumulate
beyond an amount equal to the total maximum unemployment benefits which
would be payable during a period of two years to all of the then contributing
employees of the manufacturer. Whenever the fund reaches such maximum
amount the obligation of the manufacturer and of the then contributing
employees to make further payments shall be suspended, but such suspension
shall not apply to such employees as have not contributed during the period
of one full year. Payments to said fund shall only be revived when the fund
is again reduced to an amount less than the total maximum benefits which
would be payable during a period of one year to all of the then contributing
employees of the manufacturer.
ART. X. All funds contributed by the contributing employees since May 1,
1928, and the amount contributed by the manufacturer or which should have
been contributed by the manufacturer from May 1, 1928, to the date of the
actual execution of this agreement shall immediately be turned over to the
board of trustees.
ART. XI. Any questions which may arise out of the interpretation or performance of this agreement which involve, directly or indirectly, the interpretation
or performance of the agreement between the parties with reference to wages
and working conditions shall be determined solely by the instrumentalities pro



vided for by said agreement, and such determination shall be binding and conclusive upon the parties hereto, the board of trustees and the contributing
employees. It is the intention hereof not to affect in any part.cular the jurisdiction, powers, rights, or duties of the instrumentalities functioning under said
agreement relating to wages and working conditions.
ART. XII. (a) The manufacturer and the union shall each appoint not exceeding three trustees (each to appoint an equal number), who shall hold office at
the will of the appointing party. In addition to the trustees thus selected,
Benjamin M. Squires is also hereby designated as a trustee and as chairman of
the board of trustees. The number of trustees may be changed from t me to
time by the joint act of the manufacturer and the union, but there shall not at
any time be less than three trustees, nor more than seven, and the number of
trustees shall be at all times odd. The manufacturer and the union shall at all
times each be represented on said board by their respective appointees, and
each shall at all times have equal representation on said board. There shall
always be a chairman of the board of trustees who shall be selected by the
manufacturer and the union, and who shall not be removable except by the
jo.nt act of the manufacturer and the union. Any trustee may at any time
resign from the trust hereby created by giving written notice of such resignation personally or by mail, addressed to the last known post-office address of
the remaining trustees. Should any of the trustees designated by the manufacturer die, resign, become incapacitated or unable or unwill ng to act, or be
removed, the vacancy so occurring shall be filled by the appointment of a successor to be named by the manufacturer. Should any of the trustees designated
by tiie Union, die, resign, become incapacitated or unwilling to act, or be removed, the vacancy so occurring shall be filled by the appointment of a successor to be named by the union. All trustees appointed to fill any vacancy
hereunder shall be vested with all the rights, powers, and duties herein and
hereby vested in their predecessors. Should the chairman of the board of
trustees die, resign, be removed, become incapacitated, unable, unwilling, or fail
for any reason to act, then the vacancy so occurring shall be filled by the appointment of a successor named by the manufacturer and the Union, and if they
are unable to agree upon such successor within a period of 30 days, such
vacancy shall be filled by the appointment of a successor designated by Judge
Julian W. Mack and/or Judge Samuel Alschuler. U n t l the appointment of a
successor chairman of the board to fill such vacancy, the remaining trustees
shall exercise all of the powers and perform all of the duties of the board of
trustees. The appointment of any trustee hereunder shall be in writing delivered to the remaining trustees, or their successors. If all of the trustees designated by the union or by the manufacturer, as the case may be, shall not be
present at any of the trustees, the trustee or trustees designated by the
manufacturer or the union as the case may be, present at such meeting, shall
be entitled to cast as many votes or the same number of votes as the trustees
designated by the other party present at said meeting shall be entitled to cast,
it being the intention hereof that at any meeting of the trustees, regardless of
the number present, the trustees representing the manufacturer and the trustees
representing the union shall have equal voting power.
(&) All questions that may arise or come before the trustees shall be determined by the affirmative vote in person or by proxy of a majority of the
trustees. Such vote may be given in meeting assembled, or by a writing signed
by the trustees, or by a majority of them, provided such writing is signed by
one or more trustees designated by the union, and one or more trustees designated by the manufacturer, and such decision or act of a majority of the
trustees shall be binding and conclusive upon the parties hereto, the board of
trustees, and the contributing employes. Any trustee may act by proxy. Any
trustee may call a meeting of the board of trustees by giving at least five days'
notice in writing of the time of holding of such meeting and having a copy
thereof personally delivered to each trustee, or by mailing the same, postage
prepaid, to the last known address of each trustee. Meetings of the board of
trustees may be held at any time, without notice, if all of the trustees consent
(c) None of the trustees, other than the chairman of the board of trustees,
shall be entitled to compensation hereunder. The compensation of such chairman shall be fixed by the manufacturer and the union, and shall be paid out of
the fund.



(d) The board of trustees shall have power to employ at such compensation
as they may fix, agents, representatives, accountants, experts, and attorneys,
and such other appropriate instrumentalities to assist it in the proper administration of the fund as to it shall seem advisable.
(e) The principal and interest of the fund, except such amounts as shall
be required for current purposes, shall be invested by the board of trustees
in direct obligations of the United States Government, provided, however, that
the board of trustees by unanimous vote may invest the funds in securities
legal for trust companies in the State of Illinois. All moneys not so invested
shall be deposited in substantially equal amounts in two or more clearinghouse banks located in the city of Chicago, or in banks which are members of
the Federal Reserve System.
(f) The Board of trustees shall keep true and accurate books of account
and records which shall be audited by certified public accountants at least
twice in each year.
(g) Each of the trustees shall be protected in acting upon any notice, request,
consent, instruction, certificate, affidavit, resolution, opinion, receipt, application, or other paper or document believed by him to be genuine, and to have
been made, executed, or delivered by the proper party or by the proper
authority, or authorities, of the union or manufacturer, as the case may be,
or by the party or parties purporting to have made, executed, or delivered
the same, and shall be protected in relying and acting upon the opinion of
legal counsel in connection with any matter pertaining to the carrying out of
this agreement.
(fo) Neither the trustees, nor any of their successors, shall be liable or responsible in respect to any action taken or omitted to be taken pursuant to any
vote cast by the trustees, or any of them, or any proxy or proxies appointed
hereunder, nor shall the trustees or any successor or successors, be liable for
any loss occasioned by any act of commission or omission done or omitted to
be done in good faith by them, or any of them, or of any proxy or proxies that
may be appointed hereunder, nor for the acts of any agent, attorney, or employee selected with reasonable care by them, or any of them, nor shall any
trustee be liable for any act of omission or commission of any other trustee,
or of any proxy or proxies, that may be appointed hereunder.
(i) The board of trustees shall permit the duly accredited representatives
of the manufacturer and the union at all reasonable times during business
hours to examine the books and records kept by it hereunder.
(j) The board of trustees shall have the power and authority to make
reasonable rules and regulations, not inconsistent herewith, to carry out the
provisions of this agreement, and shall have the right to make and adopt
their own rules of procedure and action.
(7c) The board of trustees shall be entitled to incur reasonable expenses
for the purpose of carrying out the provisions of this agreement, which expenses shall be payable out of the fund.
ART. XIII. Whenever the trustees or board of trustees are referred to
herein, it is intended that such term shall include the trustees or board of
trustees for the time being in office. This agreement and the terms and conditions of the trust hereby established may be modified at any time by the
board of trustees, upon its obtaining the written consent of both the union
and the manufacturer.
ART. XIV. This agreement may be extended or renewed by the joint written
consent of the manufacturer and the union.
ART. XV. The trustees designated by the manufacturer and the union and
the chairman of the board of trustees, from time to time designated hereunder, shall evidence their acceptance of the trusts hereby created by executing this agreement, or a duplicate thereof, and by such execution shall agree
that they will in good faith and in all respects exercise the powers granted
to them hereunder.
ART. XVI. The trustees representing the respective parties on April 30,
1928, shall be, and they are hereby continued as such trustees, subject to the
terms of this agreement.
In witness whereof the parties have caused this instrument to be duly
executed the date first above written.









(1) The contributing employee must have made contributions regularly during his employment; in addition, he must have been a member of the union
in good standing since November 1, 1927, up to and including the date when
he shall apply for benefits; or, if he were not a member of the union on
November 1, 1927, then he shall be eligible for benetfis after one year from
the date of his first contribution.
(2) In no case shall a contributing employee receive more than an amount
equal to seven and one-half full weekly benefits in a single year; always
provided, however, that there shall be no benefit payment made hereunder
unless there are moneys in the fund available for the purpose; and provided
further that benefits less than seven and one-half weeks not paid either
through lack of funds or through action, by the board shall be cumulated
and payable even though these payments may raise the number of weeks
of benefit in certain years in excess of seven and one-half weeks.
(3) It is agreed that benefits shall be paid only for such involuntary unemployment as results from lack of work, and that no benefit shall be paid
to an employee who voluntarily leaves his employment or to an employee who
is discharged for cause or who declines to accept suitable employment.
(4) It is agreed that no benefits shall be paid or distributed for unemployment that directly or indirectly results from strikes or stoppages or any
cessation of work in violation of the trade agreement now in force between
the manufacturer and the union; nor shall any benefits at any time be paid
or distributed to employees who at the time are engaged in strikes or stoppages or who have ceased work in violation of said trade agreement.
(5) A contributing employee who has voluntarily interrupted the regularity
of the payment of his contributions shall not receive benefit out of the fund
in excess of one full weekly benefit for every 10 full weekly contributions in
a single year.
(6) In complete unemployment the contributing employee shall promptly
register with the employment exchange, and such unemployment shall be
deemed to begin on the date of such registration.
(7) Contributing employees who are entitled to unemployment benefits under
this agreement, and the rules and regulations adopted by the board of trustees
in pursuance hereof, shall receive out of the fund unemployment benefits not
in excess of 40 per cent of the average full-time weekly wages of said contributing employee, and in no case in excess of $20 for each full week of
(8) An advisory committee, composed of representatives of the parties
hereto, with the aid if desired of an outside expert to be selected by them
jointly, shall submit to the board of trustees from time to time if requested
by said board, recommendations for rules and specifications concerning records
required to be kept by the manufacturer, the union, and the trustees, in order
to insure the efficient and economical administration of the fund.
Said committee shall also submit to the board of trustees from time to time,
if requested by the board, recommendations as to rules and regulations relating to the transfer of contributing employees from one manufacturer to another,
the return to employment of contributing employees temporarily withdrawing
from the industry, the proper basis of calculating benefits in the case of shorttime employment, the proper reduction of unemployment or short-time employment because of overtime employment of contributing employees, the
proper limitation to be placed upon the amount of weekly benefits to be received by any contributing employee during any one season of unemployment,
a proper waiting period between the beginning of unemployment in any one
season and the accrual of weekly benefits hereunder, and other matters of like
character upon which the board desires recommendations.
It is understood and agreed that the board of trustees shall have power
to make rules and regulations not inconsistent with the terms of this agreement on the matters aforesaid, but shall only do so after proper investigation and examination of the recommendations submitted by the aforesaid
advisory committee, it being the intention hereof that before making said rules
and regulations the parties hereto shall have had full and ample opportunity



to m a k e necessary investigations a n d .present to t h e board t h e conclusions
a n d suggestions resulting therefrom.
The board of trustees shall have the power, if it deems advisable, to request
a report on any one or more of the aforesaid m a t t e r s by the committee, or
separate reports by the representatives of either p a r t y on said committee, by
a day c e r t a i n ; a n d in the event t h a t said reports a n d recommendations a r e
not forthcoming, m a y proceed to m a k e on its own behalf any investigations
t h a t it deems proper and formulate any rules a n d regulations it deems advisable under the circumstances.
J A N U A R Y 26,

A joint contributory plan of unemployment insurance h a s been in effect in
t h e men's clothing industry of Chicago since May, 1923. Similar plans were
introduced in the same industry in t h e city of Rochester a n d in t h e city of
New York during t h e year 1928, but this statement will be limited to t h e
plan a n d its operation in t h e Chicago clothing market.
Provisions for t h e collection of contributions, t h e appointment of trustees,
payment of benefits, and the administration of the plan generally a r e set forth
m t h e agreement, copy of which is inclosed, and need not be repeated in detail.
At t h e outset, the plan called for contributions by employers a n d workers
of 1% per cent of t h e total wages. I n 1928 the contribution of the employers
w a s increased to 3 per cent, making a total contribution of 4 % per cent. Benefits were limited by t h e first agreement to 40 per cent of the wages for a period
not to exceed five weeks per year. Under the present agreement, t h e n u m b e r
of weeks per year is increased to 7%, with provision for t h e cumulation of
unpaid benefits from year to year. F r o m time to time t h e rules governing
t h e payment of benefits have been changed to safeguard the funds. At present,
t h e weekly benefit is 30 per cent of the wages. For the most p a r t , the plan
operates on a house fund b a s i s ; t h a t is, contributions in t h e case of any
p a r t i c u l a r firm m a y be used only for t h e payment of benefits t o workers employed by t h e firm. T h e funds a r e administered by trustees representing t h e
employers, trustees representing the workers, and one n e u t r a l t r u s t e e as
At t h e present time, about 20,000 workers come under the insurance scheme.
Contributions to date total $5,050,428.23. Benefits paid to d a t e total
$4,034,863.83. Expenses of administration amount to $334,872.25. The balance
available for the payment of benefits is $663,042.88.
I am not prepared to s t a t e t h a t the scheme h a s accomplished much in t h e
w a y of regularizing employment. I t h a s resulted in t h e accumulation of
exact d a t a a s to employment and unemployment; it h a s made for more intelligent thinking about unemployment; it h a s probably m a d e for a better distribution of labor as between busy a n d slack seasons. I t is safe t o say t h a t it
h a s been a factor in helping to regularize employment, b u t t h e r e a r e other
more important factors. F o r example, the saving, in overhead, which would
result from a fuller use of plant a n d equipment, is a much larger item than
the unemployment insurance premium. On t h e other hand, t h e employer h a s
probably been m a d e more a w a r e of t h e cost of slack periods by h a v i n g a better
knowledge of time lost in unemployment.
B E N J A M I N i/L.



CHICAGO, January



M Y DEAR SENATOR : I am very glad to comply with your letter of J a n u a r y 26
asking for information concerning unemployment in t h e clothing i n d u s t r y in
Chicago and in H a r t , Schaffner & M a r x .
I n the first place it is necessary to realize t h a t in all our clothing p l a n t s we
h a v e agreements with t h e Amalgamated Clothing W o r k e r s of America t h a t no
w o r k e r m a y be discharged except for some delinquency. This m e a n s t h a t t h e r e
can be no reduction of t h e labor force to correspond to t h e slackness of business.



Whenever there is not enough work to keep all employed, the work that is
available is divided equally among all the workers in each particular group.
Under these circumstances the amount of unemployment varies directly with
the sales of clothing. Since 1925 this company has made special effort to devise
lines of clothing which could be made up before selling. The ordinary method
is not to manufacture clothing unless orders are in hand. With the introduction of cheaper lines made in fewer models and fabrics we have been ablewithin the last three years to provide considerable work in the two slack
periods of the year when otherwise we would be waiting for orders to be taken.
This change of policy had very much more to do with the reduction of unemployment than any other device, particularly the unemployment funds.
The first effects of the effort to introduce cheaper lines was a marked
reduction in the amount of work required on each suit, particularly as to
cutting. This created such a severe condition of unemployment among the
cutters that it was finally necessary to pay a dismissal wage to 150 cutters in
order to provide for abundant employment for those remaining. Since that time
the amount of lay-off per cutter per year has been about five or six weeks.
All the rest of the year each cutter works full time.
At the present time the amount of employment we give to our people as ai
general average for all tailoring is an equivalent of a full 38-week year. This,
means that the amount of slackness divided equally among the workers amount
in the year to an equivalent of 14 weeks in the tailor shop.
On account of the aforesaid policies and efforts to increase production, any
effect which might have been produced by the unemployment-insurance scheme
has been entirely overshadowed, and, therefore, it is impossible to say just what
effect it might have had on regularization. The fact that the company wa&
obligated to contribute 1% per cent of the total pay roll into an unemployment
fund was a factor of very little consequence in determining the manufacturing
and selling policy of the company, which had no effect upon the policy of employing new labor, inasmuch as that factor is entirely determined by our labor
The unemployment fund has had very little effect upon the efficiency of the
workers because that is thoroughly well taken care of by our labor agreement
itself. The efficiency of our labor is directly due to the wage policy, the
efficiency of management, and the manager to hire, wage policy which prevents
turnover, and the cooperation of the union. I have no means of estimating
any effect upon morality.
The effect of the unemployment fund, I believe, is to materially increase the
satisfaction which the worker gets from his wages. It provides a reservoir
from which he can draw at any time when the value of the dollar is at its
maximum to him. This enables the average worker to regularize his standard
of living, and does not force him to make extreme changes in his mode of life
during slack times. This undoubtedly leads to greater satisfaction with our
labor system generally and makes him more loyal to his union, and, therefore,
more amenable to his discipline which is greatly to the advantage of the
For these reasons I believe that such a system is sure to be advantageous to
any industry in which better industrial relations are needed. Our experience
has shown us that anything which gives the employee greater security in income has manifold effects in all directions which are to the greatest benefit
to the employer.
If there is any further information I can furnish your committee please
consider me at your disposal.
Sincerely yours,


United States Senate, Washington, D. G.

(Allen B. Forsberg, secretary of the Wisconsin Unemployment Prevention
Association, Madison, Wis.)
Many employers have prevented unemployment by the use of scientific
production and sales methods. The Huber unemployment prevention bill is



based on their example, and makes an inducement to all employers to adopt
similar methods, and thus keep their labor force working steadily.
This bill is like the Wisconsin compensation act which puts a premium upon
good management in reducing accidents. This bill would make it profitable
for employers themselves to arrange their work so that avoidable lay offs
will be prevented.
The experience of many countries was studied in drafting this bill. Several
administrative features are taken from the 1912 and 1920 unemployment insurance laws of Great Britain, which affects 8,000,000 work people. Similar measures of Denmark, France, Italy, and Switzerland have been consulted.
Most industrial States are fortunate in that they already possess all the necessary commissions, boards, State officers, and employment offices needed for
the administration of this act.

Scope of act: (Section 2394—101) Applies to all employees of every corporation and of employers not incorporated who employ three or more persons.
Exemptions: (1) Farmers, canneries,-State, cities, towns, villages, townships, school districts, private employers of less than three persons, and
employees of each. (2) Persons dependent on others for their livelihood. (3)
Those receiving pensions of $500 or more annually.
Requirements: (Sections 2394—102 and 2394—103) Industry shall compensate each workman temporarily while unemployed provided he (1) has worked
six months for one or more employers, and (2) is capable and available but
unable to obtain suitable employment. He is not required to work where there
is a strike or lockout, or where less than the prevailing wage is paid.
Regulation of payments: (1) During the first three years no more than six
weeks of unemployment compensation shall be paid unemployed workmen in
any calendar year. The industrial commission may reduce this limit to maintain solvency of the fund. After the third year the limit shall be increased
to 13 wreeks.
(2) Not more than one week's unemployment compensation shall be paid for
every four weeks the unemployed person has worked for employers.
(3) No employee can legally waive his right to unemployment compensation
payments, nor shall they be assignable or subject to attachments for employees'
(4) No unemployment compensation shall be paid persons unemployed due t o :
(a) Voluntary leaving work;
(&) Dismissal for reasonable cause;
(c) Strike or lockout;
(d) Confinement as inmate in State institutions, etc.
Rate of unemployment compensation: (Section 2394-104.) One dollar for
each work day for male and females over 18 years; 50 cents for those 16 to
18 years is paid qualified persons unemployed. Provision is made for payment
of transportation to obtain work outside the district. An additional 10 per
cent is paid into the State treasury to cover additional costs for administering
this act.
Employers' Mutual Employment Insurance Co.: (Section 2394-105.) The employers of the State will organize, to administer a reserve fund which will be
accumulated during prosperous times, to tide over dull times. Each employer
will pay a small premium periodically into this fund. The amount of each
employer's quota will depend upon how regular he keeps his labor working.
The employer who hires and fires the most will pay higher rates. Employers
who keep their men working steadily will pay less. Thus there will be a continuous incentive for employers to arrange their work so as to keep their men
^working steadily.
The experts of the Employers' Mutual Employment Insurance Co. will make
extended studies into the causes of unemployment and will help each individual employer solve his own problems. This employers' mutual fund is
controlled solely by employers themselves. The State does not interfere any
more than with other insurance companies.
The industrial commission, upon application, may exempt certain employers
from membership in this company.
Unemployment advisory board: (Section 2394-106.) To facilitate harmonious
administration of the act, a State advisory board, consisting of an equal number
of members to represent both employer and employees, selected by industrial



commission from lists submitted by both parties for that purpose. One member
at large shall act as a chairman. The board shall serve without pay; shall
meet at the call of the commission to aid in general administration of the act.
Similar boards may be formed to serve in localities.
Claims and procedures: All claims shall be first considered by a deputy of
the industrial commission, who shall decide claims within one day; whereupon
an order on the employer may be issued for the amount of unemployment
compensation due him.
Unless contested, the unemployment compensation will then be paid from the
fund of the employers' mutual.
Contested cases: In any case where the claim is disputed, it shall be referred
to the industrial commission and a still further appeal is provided to the circuit court, the court action to be defended by the industrial commission.
Penalties: (Section 2391-109.) Employees who endeavor to falsely secure
payments, or employers who attempt to avoid payment through misrepresentation, may be punished by prison sentence, or fine, or both, at discretion of

(By John R. Commons)
{Reprinted from the October 1, 1921, issue of the Survey, 112 East Nineteenth Street, New
The credit problem is our biggest labor problem, because it lies at the bottom of the question of unemployment, and that question is the point of bitterest contact between capital and labor to-day. One might even say that
socialism and trade unionism are both founded on the fear of unemployment.
It is with this conviction that leaders of opinion in Wisconsin, the State
which so often has been the pioneer in industrial legislation, have devoted
much thought to the problem of unemployment prevention. The result of
this, in tangible form, has been the so-called Huber unemployment prevention
bill, which was before the legislature last winter and the enactment of which
will again be urged during the coming session.
The three main causes of unemployment are the labor turnover, the seasons,
and the credit system. The labor turnover as a cause of unemployment is not
a serious matter. Rather is it a good feature of modern liberty. Liberty
means labor turnover; it means that the worker can quit one job and go to
another; it means that the employer who is dissatisfied with the inefficiency or
misconduct of the employee can dismiss him and he can look for a job for
which he is better fitted. Consequently, in the Huber bill for the insurance
and prevention of unemployment before the recent Wisconsin Legislature, it is
provided that the first three days of unemployment shall not be considered
unemployment. The bill places the date of the beginning of unemployment
compensation the fourth day after the workman is laid off. Labor turnover can
be accommodated on about three days' time for hunting a job if employment
is steady.
The question of labor turnover may not be considered a serious feature of
the unemployment problem. It has other evils, however. It is expensive to
the employer. Better for him is a steady force of good and willing workers,
who feel that his industry is a place where they want to stay for life. Yet
there are establishments that go on the other basis. They consider ft is better
for them to have a procession of floaters than it is to have steady workers.
This is a matter of choice, largely, with the management.
The summer and winter seasons are not the most serious problem of unemployment. They are a cycle which comes regularly every year. Certain
industries have a busy period in the summers; others in the winter. Consequently, with a regularly recurring cycle, both the firms and the workmen learn
to adjust themselves. In some cases the adjustment is made by hiring men by
the year on a salary basis; in other cases by dovetailing industries, such as the
coal and ice business. If that is not accomplished, then there remains the
alternative: Pay the worker higher wages during the busy season, so that he
can tide himself over until the following busy season, which can be calculated
upon. The leading example is in the building trades in northern sections. The



building workmen receive high wages, say, a dollar an hour, but as they
work only about eight months a year, that dollar an hour is equivalent to only
about 65 cents an hour through the year. The building-trade mechanic ordinarily does not have any other occupation that he can dovetail, so that in the
busy season we pay him a dollar an hour, 65 cents of which is wages and 35
cents of which is a kind of insurance, in order that he may be on hand the
next season, when we want to open up business. Yet there are large building
contractors who are learning how to spread their work over the year.
Where the industry does not equalize itself, the employer must make some
special arrangement in order to keep labor steadily employed throughout the
year. One of the illustrious examples in this country is the Dennison Manufacturing Co., of Framingham, Mass. This company started as manufacturers
of Christmas trinkets. Their busy season began in September, when the
retailers ordered their goods, and ended with about three or four months of
intense crowding and overwork. Then they adopted a definite purpose of
stabilizing their business. They did it by various devices, well known to
manufacturers at the present time. They coordinated their sales department
with their production department and it became the business of their salesmen to induce the retailers to order in advance so that the manufacturing
could come along throughout the year instead of being concentrated in one
season. Now they begin manufacturing Christmas cards 15 months before
they are actually sold to the ultimate consumer. They introduced many other
products to which their employees could be transferred, and they trained their
workers so that they might change from one occupation to another or something nearly like it. Now they manufacture several thousand different articles,
and for several years they have had no unemployment. They have stabilized
their industry by dovetailing and spreading out. It has required ingenuity,
good management, and good salesmanship, but it has been accomplished.
Modern business can stabilize seasonal employment if it is deemed worth
while, and can even stabilize the credit cycle. Mr. Redfield, former Secretary
of Commerce, has cited his own case, in the metal industries, where since
the year 1890 they had not laid off a man on account of lack of work. In
the hard times of 1893 to 1897 it was skating on thin ice, and they had
great difficulties but they succeeded. It was accomplished through division
of labor on the part of the management. It was the business of the sales
department to adapt itself to the work of the production department.
This idea is well recognized. The sales department must be subject to the
production department, so that rush orders are uot taken on that can not
be delivered except by an overexpansion of the business with a certainty that
men must be laid off after the rush orders have been finished. The cycle
of unemployment is the cycle of rush orders. When credit is good and prosperity is around, people will not wait. The business man thinks then that
he must expand his factory; he must take on more laborers, he must get out
his orders quickly or somebody else is going to get those orders. A great
firm in Wisconsin pulled in laborers from the farms and negroes from the
South, then suddenly laid them off, to be supported and policed by a little
But more important than the employer is the banker as the stabilizer of
employment. During the recent overexpansion a certain manufacturer applied
for a loan of $250,000 in order to enlarge the plant. The banker turned the
application over to the bank's industrial engineer, recently added to the staff,
and he showed the manufacturer how, by better economy and better labor
management, he could get along without that loan of $250,000. The banker
put the screws on the manufacturer. Six or eight months afterward, when
the collapse came, the manufacturer was profuse with thanks to the banker.
The service of refusing him credit in order to prevent expansion was much
greater than jyould have been the service of furnishing him credit.
The banking system, which is the center of the credit system, more than
the business man who is the actual employer, can stabilize industry, and,
in stabilizing industry, stabilizes employment. The difficulty is that no one
individual can do it alone; no bank can do it by itself; no one business
man can do it by himself; it is a collective responsibility and collective action
is necessary. If one person is trying to stabilize his industry by not overexpanding and not taking too many rush orders, he simply knows that his
competitors will get his business. But if all the business men, who are competing with each other, know that the banks are treating the others in the
same way, then stabilization might be expected to work. So that the induce



ment to stabilize employment in order that it may be really effective must not
only take the example of those manufacturers who have pioneered the way
themselves, but must interest the entire banking system of the State or Nation
in the plan.
Now the Huber bill proposes that when an employer lays off a man, if the
man has had six months' work in the State during the year, t l ^ employer
shall pay him $1 a day for a period of 13 weeks, and pay the State 10 cents
a day additional toward expenses of administration. This creates a possible
liability of about $90, added to every man taken on in case he is laid off
through no fault of his own, but simply through fault of the management.
It means an added liability which the employer assumes when he hires a workman, so that, under such circumstances, it should be expected that when an
employer wants to expand, and he ordinarily can not expand except by getting credit, he will go to the bank for additional credit and the banker will
necessarily inquire as to what security he has that, at the end of these rush
orders, he will be able to continue the employment or pay that possible $90.
In other words, the business man and the banker together are the controllers
of credit, and it is the control of credit which can stabilize business. The
overexpansion of credit is the cause of unemployment, and to prevent the overexpansion of credit you place an insurance liability on the business man
against the day when he lays off the workmen.
As to the practicability of a proposition of this kind, unemployment insurance is already in existence in seven or eight countries, with a somewhat
different system. It was started some 25 years ago in Switzerland, with a
system which broke down because wrongly conceived. It then spread to Belgium where it has been in operation for some 20 years; then to Denmark some
15 years ago; then England took it up on the grandest scale yet known. It
applied in England, some 10 years ago, to 2,000,000 workmen, but since the
war the number has been increased until the law applies to 12,000,000 workmen. Italy followed the example of England. Norway has established the
system. It appears that the industrial unrest in England and Denmark would
before now have brought revolution had it not been for this unemployment
insurance. By taking note of the experience of these countries, it is possible
for America to improve upon their systems. In the Huber bill most of the
rules and regulations, the interpretations of the law and the procedure, are
taken from the British system. The British system was established in 1912.
It was revised in 1920 and these particular rules and regulations were not
materially changed. They had been working satisfactorily for eight or nine
years and are now continued.
In the first place, a worker under the British rules is not entitled to compensation benefits if he leaves his work of his own accord or if he is discharged
because of inefficiency or misconduct. He is not entitled to compensation if the
unemployment is caused by strikes or lockouts either in his own shop or in
related shops. No strike or lockout entitles a person to the unemployment
benefit. He is required to accept a job which is offered to him through the
public employment offices, a job which must be substantially equivalent in
compensation and conditions to the one which he has, and not too remote from
his home. 5Tet if traveling expenses are paid by the employer he can be required to take a remote job. Of course he can not literally be compelled to take
the job, but if he does not take it his unemployment compensation ceases and
the employer's liability is discontinued.
The workman must apply to these public employment offices for vacant
jobs. There is at every employment office a board of arbitration to settle
disputes. If the workman claims compensation and the employer denies it,
the claim can be taken up by a board appointed by the Government, consisting
of one employer, one employee, and a third party. The employment officer
in the first case makes a record as to what the job is and he then notifies the
employer whether the man is entitled to compensation or not. If the employer objects, he can appeal to this board which meets every Saturday in
an informal way at the employment office. If the workman objects he can
appeal to the board of three, and finally, if that does not settle the claim, he
can appeal to an umpire. In England they have one umpire to settle all of
these cases on appeal, and during the first four or five years there were only
1,500 cases appealed to this umpire. Any person, reading the decisions of
umpire, can easily ascertain how the law worked, for there are interpreted
all the points as to whether the person is entitled to the unemployment benefit
or not.



The evils of the European systems are two fold: In the first place the
state goes into the insurance business and operates an insurance fund, and in
the second place the finding of jobs is left largely to the trade unions.
The system which was started in St. Gall, Switzerland, 25 years ago, broke
down in two years. It provided for compulsory insurance on every workman.
The workman was to insure himself. The state did not contribute and the
employer did not contribute, but the workman was assessed and he had to pay
into a state fund for his own benefit in case of unemployment. The result
was that workmen began to leave the canton. The system broke down.
It was next taken up about 35 years ago in the city of Ghent, Belgium. A
different feature was added. It provided that if any association of workmen
of a voluntary character should be organized for the relief of unemployment
and the accumulation of a fund, the city of Ghent would add one-half of the
amount that the association paid out. In other words the city of Ghent
subsidized the trade-unions, which were the only organizations that could take
advantage of the law. They have already their out-of-work funds; they already have their employment offices, their business agent to find jobs, and the
city of Ghent comes to their aid, subsidizes them by paying practically onehalf the amount that the union itself had paid. Apparently the only reason
why that system has worked in Ghent and has spread over Belgium is because
certain individuals have given very great and careful attention to it.
When the same system, applied in Denmark, had resulted in great abuses,
and the law was revised in 1920, it was provided that the unions should no
longer decide whether a man was entitled to compensation benefit or not. A
state officer was appointed whose business is that of an umpire to decide as
between the union and the state. The practice of subsidizing the union was
continued, but the provision took out of the hands of the unions the decision as
to whether the union is entitled to the state subsidy or not.
When England took it up, 10 to 15 years after these other countries, she
adopted an eirely new idea—that the three parties were to contribute. The
workman was to contribute something like 5 cents a week, the employer 5
cents a week, and the state 2y2 cents a week. This money was to be put into
a state fund, operated by the Government. But England retained the feature
that if a trade union was paying out-of-work benefits it could present a bill to
the Government showing the amount of money it had paid out and the Government would refund to the union the amount called for by the insurance scheme.
These theories and practices in Europe have been based upon the idea, first,
that unemployment is something that can not be prevented, that it is something inevitable, and that, this being the case, a philanthropic system to aid
working people when out of work should be established ;*second, that the state
should both contribute to the fund and operate the insurance business.
The Huber bill, introduced in Wisconsin, abandons the idea that the State
can operate the system successfully or that the trade-unions can operate it.
It starts on the idea that the modern business man is the only person who is in
the strategic position and has the managerial ability capable of preventing unemployment. In other words, the system proposed is exactly like that of the
workman's accident compensation law of this State. A mutual insurance company is created, operated, and managed solely by the employers. That company is created upon the same principle as the State's accident compensation
law. The employers establish their own premiums, supervised by the State
insurance board; they pay out the benefits to the workmen exactly as they
pay out the benefits under the accident compensation law. The only difference is that instead of the doctor who cures the man of accidents, the
bill provides an employment officer who finds the man a job. The system avoids what hight be called the socialistic and paternalistic schemes
of Europe. It is a capitalistic scheme. It avoids the socialistic scheme, in that
the State does not go into the insurance business; it avoids the paternalistic
scheme in not paying out relief for an inevitable accident. It induces the
business man to make a profit or avoid a loss by efficient labor management.
It places the compensation so low that the workman has no expectation of
more than enough to pay his rent.


If we may judge from what employers have done in the case of the accident compensation law we may predict what they will do under an unemployment compensation law of this kind. When the State of Wisconsin enacted



Its accident compensation law, it tied it up with an accident prevention law
and placed both laws under the administration of the State industrial commission.
The industrial commission then made a search throughout the country to
find the best man for the prevention of accidents. They found O. W. Price,
of the International Harvester Co., and succeeded in inducing him to come into
the State and take up the work of accident prevention. This was done even
before the compensation law went into effect. Mr. Price organized the accident
prevention work; he started the safety movement. He started organizations
in the shops and in communities. He established safety committees by which
the employers themselves, along with their engineers and their workmen, drew
up the safety rules. The industrial commission law provides a place for these
advisory committees.
If one examines the 300 pages of the labor law of the State he will find
that the legislature enacted only 100 pages and these advisory committees of
employers and employees drafted 200 pages. These were then issued as " orders " by the industrial commission. Two-thirds of the labor laws of the State
are actually made by the men in the industries, who must obey the laws and
who therefore frame them. • The legislature simply has given to the industrial
commission the power to make these rules and orders and has authorized the
commission to bring in the employers and safety experts to assist them in
making them.
The unemployment compensation bill follows along the same line. We can
safely predict how it will work. At the time when the accident compensation
law went into effect one of the large firms of the State came to the industrial
commission with the alarm that the law would increase their premium for
employers' liability from $5,000 a year to $22,000 a year. The insurance company had put up their premium'to that figure under the new law, and the claim
agent had figured it out the same. The commission asked them why they did
not adopt the safety first movement; why they did not convert their claim
agent into a safety expert; why they did not equip their plant with safeguards
and teach their workers safety first. They took the idea and equipped
their establishment fool proof. The first year, instead of paying $5,000 on account of increased cost of premiums, they paid only $2,500 on account of industrial accidents. They made money by the new law.
It is amazing what business can accomplish when it has a sufficient inducement. If there is enough money in it, it can accomplish more than any
other agency. At the present time the business men of this country have
formed their great national safety council. They have taken Mr. Price away
from Wisconsin and have taken three or four other employees of the industrial
commission who have made names as safety experts. They have put them
in charge of this national safety movement, and they are carrying on throughout the Nation, not only in the factories, but on the streets and in the schools,
a great safety campaign. They have taken these people away from the State
because the State will not pay high enough salaries. Public business will
always be more inefficient than private business, because, as a man becomes
efficient in public business, he either gets fired on account of politics or the
business man hires him and pays him a bigger salary. These former employees of the industrial commission are now paid three to five times the
salary paid by the State. The manufacturers of the Nation, with their help,
are now doing more for safety than all of the legislatures, all of the labor
organizations, all of the philanthropic associations, ever thought possible,
simply because they make money by doing it and the others do not. They
even operate safety campaigns on the streets and in the schools, indirectly
reducing accidents in the shops. The employer was probably never legally
liable for more than a third of the accidents in the shops. The hazard of
the industry and the carelessness of workers and fellow workers caused the
other two-thirds. Yet the employer was made responsible for all the accidents.
He knows how to " s e l l " safety to the public and to his own employees, and
to turn safety into profit. He can reduce accidents 75 per cent, say Mr.

Likewise, in Wisconsin, the State Employers' Mutual Liability Insurance
Co. has taken over actuaries and safety experts from the industrial commission, at higher salaries. At the hearings on the Huber bill, a leading employer, while opposing the bill, showed how it would work. He figured that



the proposed law would cost his firm $50,000 a year. If it should go into
effect, he would not trust the State employment offices—he would hire his
own employment manager to find jobs for his men when he laid them off.
This is the business way of looking at it. The State will pay low salaries
to men responsible for spending $20,000,000 a year, because the people can
not measure inefficiency, and the legislature can save the State from bankruptcy out of the pockets of the taxpayers. But the business man, who must
measure inefficiency by bankruptcy in dollars and cents, will pay an employment manager two to five times the State salary in order to save $50,000
a year.
Incidentally, efficient employment management, as it has come to be known
during the past 10 years, may be expected to make money for employers under
an unemployment compensation law if organized like their safety work. The
labor turnover, the dovetailing of jobs, the training of employees for different
jobs, the selection, promotion, and transfer of employees, the spreading out
of the overhead expense, the cultivation of willingness, the improved morale
of steady workers, all belong to this new profession of the industrial engineer. The saving effected by the new efficiency of this new profession may
be expected to exceed the cost of the unemployment compensation which both
makes it necessary and opens up a wider field for it.
Consider, too, how much employers get by having a steady force of workmen who can feel that it is practicable for them to buy their homes. Under
our present system it would usually be a mistake for workmen to buy homes.
Home ownership ties the workman down to the job. It ties him to the
locality and he loses his power of movement when unemployed. Under a
system of stabilizing employment the workman can afford to engage in home
building, his main inducement to thrift.
This increased efficiency and thrift,and spreading out of overhead expense
is the answer also, in part, to the objection that one State can not pioneer
the way, on account of interstate competition. Such objections did not hold
back accident-compensation laws. The increased efficiency in avoiding accidents may be repeated in avoiding unemployment. But this objection has
validity and can be met in full only by introducing the system gradually. Certain transitional measures are required. A preventive measure can not prevent
a condition already existing. Hence a revision of the Huber bill provided that
the law should not go into effect until a finding should be made by the industrial commission that business conditions are improving and workmen are
being reemployed in reasonable numbers. That is the time when companies
begin to set aside their reserve funds for investors and they set them aside
for unemployment also. Then, too, they begin to pay their premiums to the
mutual insurance company.

Further than this, there is no actuarial experience on which to base premium
rates. The best statistics are from Massacuhsetts. They show that in the
factories of that State, over a period of 25 years, the amount of unemployment
averaged about five weeks a year. It went as high as 30 per cent in the years
1893 to 1897 and as low as 2 per cent in the best years. The average was
about 10 per cent. That is almost the only existing basis for calculating premium rates. Consequently, an initial period of three years is provided in the
revised Huber bill, during which the maximum period of compensation is fixed
at 6 instead of 13 weeks. And further, if, during this initial period, the
reserves of the insurance company run low and menace the solvency of the
company, the industrial commission is authorized to shorten the period to even
less than 6 weeks, in order to protect the solvency of the company. This
feature is taken from the insurance plan of the Duchess Bleachery.
With these provisions it is necessary to create a single Employers' Mutual
Employment Insurance Co., for at least the initial period, to which all employers are eligible, rather than leave the field open to competition. The company is both a prevention and an insurance company, managed by the employers. During the initial period, the premium rates can be worked out,
under the approval of the State insurance commissioner, and the rules and
regulations can be worked out under the approval of the industrial commission.
For the purpose of working out the rules and regulations a State advisory
board of employers and employees is provided. This has been the method by
which, as already mentioned, the safety and sanitation orders, the ininiFmn?



wage orders, the apprenticeship rules and other orders of the industrial commission were made. So the unemployment compensation bill provides a framework, and leaves the details to the employers' insurance company and the
advisory committee of employers, employees, and employment managers, under
supervision of the existing State authorities.
The duty of the latter is simply to see that the law is carried into effect
and to decide disputes. The employers themselves make the rules and the State
acts as umpire. The 12 States free employment offices are already managed in
some cases by these joint committees, cooperating with the State commission,
and no material change is needed in their administration. They become
mainly recording offices for the unemployment-compensation law, since the
employers do the job-finding themselves through their employment managers
and their State-wide insurance companies.

In any proposition of this kind there are two questions. Is it practicable?
Is it desirable? The foregoing has indicated its practicability. It is based on
the knowledge gained from the experience of various European countries and
upon the experience of the industrial commission with the accident compensation law.
If we recognize that this question of capital and labor acquires its bitterness
from this failure of capitalism to protect the security of labor, then we shall
conclude that unemployment compensation and prevention is of first importance.
We have already removed from the struggle between capital and labor the
bitterness over the responsibility for accidents. Labor agitators formerly could
stir up hatred of the employer on the ground that the employer gets his profits
out of the flesh and blood of his workmen. No longer do we hear that language ; but we do hear them say that capital gets its profits out of the poverty
and misery of .labor and the reserve army of the unemployed. That is the big
remaining obstacle which embitters the relations between capital and labor.
While individuals may think it is undesirable, yet from the standpoint of the
States and of the Nation, we must submit somewhat our individual preferences
to what may help to prevent a serious menace in the future, and must impose
upon capital that same duty of establishing security of the job which it has
long since assumed in establishing security of investment.


Substitute amendment No. 1, S., to bi,ll No. 122, S. May 3, 1921, offered by
Senator Huber. Referred to Committee on the Judiciary. To create sections
2394—101 to 2394—111, inclusive, of the statutes, relating to the prevention
of unemployment by compensating workingmen while temporarily unemployed, providing insurance, and providing penalties.
The people of the State of Wisconsin, represented in senate and assembly, do
enact as follows:
SECTION 1. Eleven new sections are added to the statutes to read: Section
2394—101. The following terms, expressions, and phrases as used in sections
2394—101 to 2394—111, inclusive, shall be construed as follows:
1. The term " employee " shall mean every person, including aliens, in the
service of a person, firm not incorporated, or partnership which at any time after
the date of the passage of this act has three or more persons serving in a
common employment, and every person including aliens in the service of any
corporation (including public-service corporations), under any contract of hire,
express, or implied, oral or written, all helpers, and assistants of employees
whether paid by employer or Employee, if employed with the knowledge, actual
or constructive of the employer and also including minors who have reached
their 16th birthday or over, who for the purpose of this act, shall have the
same power of contracting as an adult employee, excepting persons—
(a) Who are employed by farmers, or canneries; or,



(b) Who are in receipt of any pension or income of $500 annually or upwards, which does not depend upon their personal exertion; or,
(c) Whose total annual income exceed $1,500, or who are ordinarily or mainly
dependent for their livelihood upon some other person.
2. The term " employer " shall mean and include every person, firm not incorporated, or partnership which shall at any time after the date when
this act takes effect have three or more persons serving in a common employment, and every corporation operating in the State of Wisconsin (including public service corporations) having in service one or more persons
under any contract of hire, written or oral, express or implied, and whether
paid by time or by piece, or partly by time and partly by piece, or otherwise. The provisions of this subsection shall not apply to farmers and canneries.
3. The expression "in service" shall be construed to mean in the service
of one or more employers.
4. The expression " strike or lockout" shall mean and include any dispute
or controversy between employees and employers, or between employees and
employees in connection with the employment or nonemployment or the terms
of employment, or with the conditions of employment of any persons whether
employees in the employment of the employer with whom the dispute or controversy arises or not.
5. The term " deputy" shall mean and include any deputy as defined in
section 2394-41, employed by the industrial commission. The deputy shall
investigate and determine applicants' eligibility of unemployment compensation
and be engaged in the performance of duties under the direction of the commission.
6. A person shall not be deemed to be unemployed on any day on which
he is following an occupation for which he derives remuneration or wages,
provided his remuneration or wages shall not be less than 75 per cent of his
usual remuneration or wages by day.
7. Two periods of unemployment of not less than two days each separated
by a period of not more than three days, shall be treated as a period of
continuous unemployment, and the expression " continuously unemployed"
shall have a corresponding meaning.
8. The term " employment district" shall mean and include such suitable
area within a reasonable distance from any free employment agency established and conducted by the industrial commission, within which unemployed
workmen may be required to accept offers of employment under the provisions of sections 2394—101 to 2394—111, inclusive, of the statutes.
SEC. 2394—102. Any employee who is unemployed shall be compensated as
wages on the fourth day of unemployment, subject to the provisions of sections 2394—101 to 2394—111, inclusive, referred to as " unemployment-compensation," at weekly intervals, and at such rates and for such periods as
are authorized in the provisions of section 2394—101 to 2394—111, inclusive,
so long as the statutory conditions continue to be fulfilled and so long as he
is not disqualified under this act for the receipt of unemployment compensation.
SEC. 2394—193. 1. Liability for the unemployment compensation as herein
provided shall exist against the last employer of an unemployed person while
unemployed in those cases where the following statutory conditions for the
receipt of unemployment compensation occur.
(a) That the employee has been in service for twenty-six weeks in accordance with the provisions of sections 2394—101 to 2394—111, inclusive;
(b) That the employee has made application for unemployment compensation in the prescribed manner, and since the date of application has been
continuously unemployed; and,
(c) That the employee is capable and available for work, but unable to
obtain suitable employment, as provided in subsection 2 of this section; and,
(d) That the employee has not exhausted his right to unemployment compensation in accordance with the provisions of sections 2394—101 to 2394—111,
2. An employee shall not be deemed to have "failed to fulfill the statutory
conditions provided in subsection 1 of this section because he has declined:
(a) An offer of employment in a situation vacant in consequence of stoppage
of work due to a strike or lockout; or,
(&) An offer of employment in an employment district where the employee
was last ordinarily employed at a rate of wage lower, or on conditions less



favorable than those which he habitually obtained in his usual employment, or
in similar employment for which he is fitted, in that district, or would have
obtained had he continued to be so employed; or,
(c) An offer of employment in any other employment district at a rate
lower than the prevailing rate of wage in his usual or similar employment
for which he is fitted, or on conditions less favorable than those generally
observed in that district, or without prepayment, by the last employer, of his
railroad fare to such other employment district as provided in subdivision
(i) of subsection 3 of this section.
3. For the purpose of and .subject to the provisions of sections 2394—101
to 2394—111, inclusive,
(a) No employee shall receive unemployment compensation for more than
13 weeks in any calendar year, and employees shall receive unemployment compensation in the proportion of one week's unemployment compensation
for every four weeks in service; provided that during the period of three
years ensuing from the date when the requirement of insurance and unemployment compensation herein provided takes effect no employee shall receive
unemployment compensation for more than six weeks in any calendar year;
(&) No employer shall solicit, receive, or collect any money from his employees, or make any deduction from their wages, either directly or indirectlyr
for the purpose of discharging any liability under the provisions of sections
2394—101 to 2394—111, inclusive; and
(c) No agreement by an employee to waive his rights to unemployment
compensation under sections 2394—101 to 2394—111, inclusive, shall be valid,
and no unemployment compensation under this act shall be assignable, or
subject to attachment, or liable in any way for any employees' debts; and
(d) When an employee has lost employment through his own fault, or volunr
tarily leaves his employment without reasonable cause, he shall be disqualified
from receiving unemployment compensation; and
(e) When an employee has lost employment by reason of stoppage of work
due to a strike or lockout at a factory, workshop, or other premises at wThich
he was employed he shall be disqualified for receiving unemployment compensation so long as the stoppage of work continues, unless he since became
employed elsewhere in an occupation which he usually follows, or has become
employed in some other occupation or employment; and
(f) An employee shall be disqualified for receiving unemployment compensation while an inmate of any prison or any workhouse, or other like institution;
(ff) Any time during which an employee is under this act disqualified for
receiving unemployment compensation shall be excluded in the computation
of periods of unemployment under this act; and
(h) A period of unemployment shall not be deemed to commence until the
employee has made application for unemployment compensation in the manner
prescribed by the industrial commission; and
( (i) If any unemployed person has a definite offer of employment in any
other employment district, and in the opinion of the deputy would be entitled
to receive or continue to receive unemployment-compensation provided he became or remained unemployed, he may apply to the deputy for his railway
fare to that place, provided that the amount of the railroad fare does not exceed
the maximum amount payable in respect of unemployment-compensation, and
the deputy shall thereupon issue, to him an order upon his last employer requiring said employer to pay or continue to pay the unemployed person the
unemployment-compensation as provided in section 2394—104, or of paying the
amount of the railroad fare to such place of employment and the amount of
such railroad fare shall be deducted from the maximum amount payable in
respect of unemployment-compensation. The industrial commission shall divide
the State into employment districts and establish free employment agencies as
may be found convenient, as provided in subsections (9), (9a), and (11) of
section 2394—52 of the statutes.
SEC. 2394—104. 1. Subject to the provisions of sections 2394—101 to2394—111, inclusive, unemployment-compensation shall be payable to any employee unemployed each week of the continuous period of unemployment commencing with the fourth day of unemployment and shall be paid by his last
employer at a $aily rate of $1 for each working day for male and female persons 18 years of age or over, and 50 cents for each male and female person
between the ages of 16 and 18 years.



2. Subject to the provisions of sections 2394—101 to 2394—111, inclusive,
for each obligation to pay $1 to any employee as unemployment-compensation,
the employers shall pay an additional 10 cents into the treasury of the State
of Wisconsin, and for each obligation to pay 50 cents to persons between the
ages of 16 and 18 years of age, the employer shall pay an additional
5 cents into the treasury of the State of Wisconsin.
The employers'
mutual employment insurance company, created by section 2394—105, shall
insure said obligation owing to the State of Wisconsin in the same manner
as the unemployment-compensation herein provided. The amount of such
payments due to the State of Wisconsin shall be determined by the industrial commission in the same manner as provided for determining the amounts
of unemployment-compensation owing by such employers, and, upon certification by the industrial commission to the State treasurer, shall be payable
as a debt to the State in monthly installments on the 10th day of each month
for all payments due as of the preceding calendar month. Sums paid into the
State treasury under the provisions of this section are hereby appropriated
to the industrial commission, the commissioner of insurance and the compensation insurance board under regulations to be prescribed by the State
board of public affairs, for the use of said industrial commission, said commissioner of insurance and said compensation insurance board in operating
free employment agencies and meeting additional expenses of administration
imposed by sections 2394—101 to 2394—111, inclusive.
SEC. 2394—105. 1. Every employer liable for the payment of unemploymentcompensation under sections 2394—101 to 2394—111, inclusive, shall insure such
liability in the employers' mutual employment insurance company which is
hereby created for the insurance and prevention of unemployment: Provided,
That the industrial commission may exempt any employer from insuring said
liability upon showing of financial ability and upon such other conditions and
penaltes as are provided in subsections 2 and 3, of section 2394—24 of the
statutes, which, including said penalties, are made a part hereof except in
so far as inconsistent with sections 2394—101 to 2394—111, inclusive. Said
employers' mutual employment insurance company shall, without payment of
license fee, be subject to the provisions and ail rules, orders, and inspections
of the industrial commission, the commissioner of insurance, and the compensation insurance board within their respective jurisdictions as provided in sections 2394—26, 2394—28, 2895m, 1896, 1896m, 1897a to 1905a, inclusive, sections 1921—1 to 1921—11, inclusive, 1966y to 197£a, inclusive, of the statutes, except in so far as inconsistent herewith. Said employers' mutual employment insurance company shall admit to membership any employer required to insure
his liability under the provision of this act.
2. The commissioner of insurance within sixty days after the passage of
this act shall fix a time and place for the first meeting of employers subject
to the provisions of sections 2394—101 to 2394—111, inclusive, for the purpose
of organization and incorporation of the employers' mutual employment insurance company, herein provided, and shall give public notice of such meeting
at least thirty days before such meeting. Each of said employers, himself
or by his duly authorized representative, not exempt under the provisions of
this section and having le;ss than one hundred employees subject of the provisions of sections 2394—101 to 2394—111, inclusive, shall be entitled to one vote
at such first meeting, or having one hundred or more employees subject to said
provisions shall be entitled to one vote for each one hundred such employees or
major fraction thereof, as determined by the commissioner of insurance, and
in the organization, adoption, and amendment of articles of incorporation, and
in the conduct of said employers' mutual employment insurance company the
provisions of sections 1895m, 1896, 1896m to 1905, inclusive, 1966y to 1972c inclusive, and chapter 86 of the statutes, shall be made a part hereof in so far
as applicable and not inconsistent herewith.
3. The requirements of insurance provided in this section and of unemployment compensation provided in sections 2394—102, 2394—103 and 2394—104,
shall take effect thirty days after such date as the industrial commission
shall, upon investigation, findings, and notice, ascertain and determine that
employment conditions are improving and that unemployed persons are being
reemployed in reasonable numbers. The industrial commission shall have
power, authority, and jurisdiction to determine such date.
4. During the period of three years from the date when the requirement of
insurance and unemployment compensation provided herein takes effect, if the
reserve fund of said employers' mutual employment insurance company falls



below such reasonable ratio to the net liability of the company as may be
determined by the compensation insurance board to endanger the solvency of
said company, then the compensation insurance board shall reduce the periods
for which unemployment compensation is payable as provided in sections
2394—103 and 2394—104, to such reasonable periods as may secure the solvency
of said company. Thereafter the periods of unemployment compensation shall
be as provided in sections 2394—103 and 2394—104. Provided, further, that
no action to recover unemployment compensation shall be entertained during
the period of sixty days first ensuing after said date when the requirement
of insurance and unemployment compensation takes effect.
5. The employers' mutual employment insurance company shall have authority subject to approval by the compensation insurance board: to classify the
industries of this State that are subject to unemployment-compensation insurance into proper classes for unemployment compensation insurance purposes; to make inspections of unemployment compensation risks and to apply
thereto an experience rating system; to establish charges and credits under
such system; to provide for refunds to employers on the basis of experience
in preventing unemployment; to assist the compensation insurance board in
approving rates, investigating unemployment conditions and other material
facts in connection with unemployment compensation risks and to assist in
promoting regularity of employment in the industries.
SEC. 2394—106. The industrial commission shall appoint a board, to be
known as the " Unemployment Advisory Board," consisting of one member
at large who shall act as chairman and an equal number of members to represent respectively employers and employees, to be selected from lists submitted
for that purpose by employers and employees. The board shall meet on call
of the industrial commission, and shall assist the industrial commission without pay, except for expenses, in investigations, and determinations, and general administration of sections 2394—101 to 2394—111, inclusive, of the statutes.
In like manner the commission may appoint similar advisory boards to function
in localities where the commission deems necessary to facilitate and promote the
effective administration of sections 2394—101 to 2394—111, inclusive, of the
statutes. The industrial commission shall make reasonable regulations for
recording the facts upon the claims of employees to unemployment compensation
may be determined.
SEC. 2394—107. 1. All questions relating to whether an employment is such
as to make the person engaged therein an employee under the meaning of
sections 2394—101 to 2394—111, inclusive, or as to who is the employer of any
employee shall be decided by the industrial commission.
2. All claims for unemployment compensation as provided in sections
2394—101 to 2394—111, inclusive, shall be filed with the deputy and all questions whether the conditions for such unemployment compensation provided in
sections 2394—101 to 2394—111, inclusive, are fulfilled in the case of any
person claiming any unemployment compensation, or whether these conditions
continue to be fulfilled in the case of a person claiming such unemployment
compensation, or otherwise arising in connection with such claims, shall,
subject to the provisions of section 2394—101 to 2394—111, inclusive, be
decided in the first instance by a deputy of the commission.
3. The deputy shall take into consideration any claim or question submitted
for his determination under the provisions of subsection 2 of this section,
and shall give his decision thereon within one day from the date on which
the claim or question was so submitted, whereupon he shall issue or refuse
to issue a statement to the employer liable for the payment of such unemployment compensation, of the employee's right to receive such unemployment
compensation, giving the reasons which shall require the employer to pay such
unemployment compensation due to the employee. The employer shall, unless
he contests such statement in the prescribed manner, compensate as. wages the
amount of unemployment compensation due said employee at least one week
after the fourth day of unemployment. The deputy shall re-issue such statement at weekly intervals thereafter as provided in this act.
SEO. 2394—108. In any case where unemployment compensation is refused
or stopped, or where the amount of unemployment compensation allowed is
not in accordance with the claim, the person claiming such unemployment
compensation or in receipt of such unemployment compensation, or where the
employer or employers' mutual employment insurance company is aggrieved by
the decision of the deputy, such party or parties may appeal their case to the



industrial commission for review and reconsideration a n d thereafter to t h e
D a n e County circuit court, in t h e same m a n n e r as provided in sections 2394—15
to 2394—24, subsection 1, inclusive, of t h e statutes.
SEO. 2394—109. 1. If for t h e purpose of obtaining any unemployment compensation or p a y m e n t under sections 2394—101 to 2394—111, inclusive, either
for himself or for any other person, or for t h e purpose of avoiding any paym e n t to be m a d e by himself a s provided in sections 2394—101 to 2394—111,
inclusive, or enabling any other persons to avoid such payment, a n y person
knowingly makes any false statement or false representation, or any person
who buys or offers for sale, takes or gives in exchange, or pawns, or t a k e s
in p a w n any document, paper, or card provided by t h e industrial commission
for recording t h e facts upon which t h e claims of employees to unemployment
compensation m a y be determined, he shall be guilty of misdemeanor, a n d upon
conviction he shall be liable to imprisonment for a t e r m not exceeding three
months, with or without h a r d labor, or shall forfeit an amount not exceeding
five hundred dollars, or both, according to t h e opinion of t h e court t h a t th^
justice of t h e case would be better met.
2. If any employer refuses or neglects t o comply with any of the requirements
of sections 2394—101 to 2394—111, inclusive, or t h e regulations m a d e thereunder, or if any employer solicits, receives, or collects any money or deducts or
a t t e m p t s to deduct from t h e wages or other remuneration of t h e employee,
either directly or indirectly, for the purposes of discharging any p a r t of t h e
employer's liability under t h e provisions of sections 2394—101 to 2394—111,
inclusive, he shall be guilty of misdemeanor a n d shall upon conviction thereof
forfeit twenty-five dollars for each offense.
SEC. 2394—110. I t shall be t h e duty of t h e industrial commission, t h e insurance commissioner a n d t h e compensation insurance board, within their respective jurisdictions, a n d they shall have power, jurisdiction, and authority, to
m a k e all investigations, classifications, rules, regulations, a n d orders and to
require all reports from employers a n d t h e employees' m u t u a l employment
insurance company reasonably necessary to enforce t h e provisions of sections
2394—101 to 2394—111, inclusive. Such investigations, classifications, rules,
regulations, a n d orders, a n d any action, proceeding or suit to set aside, vacate,
or amend any such order of t h e industrial commission, insurance commissioner,
t h e compensation insurance board, or to enjoin the enforcement thereof shall
be m a d e p u r s u a n t to the proceedings in subsections 2 and 3 of section 2394—24,
sections 2394—41 to 2394—71, inclusive, or p u r s u a n t to the proceedings in sections 1966y to 1972c, inclusive, or p u r s u a n t to the proceedings in section
1921—1 to 1921—11, inclusive, a s the case may be, which sections a r e
hereby m a d e a p a r t hereof, so far as not inconsistent with t h e provisions of
sections 2394—101 to 2394—111, inclusive, and every order of said industrial
commission, insurance commissioner, or said compensation insurance board
shall have the same force and effect a s the orders issued p u r s u a n t to said
subsections 2 a n d 3 of section 2394—24, sections 2394—41 to 2394—71, inclusive,
sections 1966y to 1972c, inclusive, and sections 1921—1 to 1921—11, inclusive,
a n d t h e penalties therein shall apply and be imposed for any violation of sections 2394—101 t o 2394—111, inclusive, of t h e statutes.
SEC. 2394—111. Should a n y portion of sections 2394—101 to 2394—111, inclusive, be adjudged unconstitutional, t h e remaining shall, nevertheless, be
valid and of full effect.
SEC. 2. This act shall t a k e effect upon passage a n d publication,





A BILL To create sections 112.01 to 112.20 of the statutes and to amend subsection (5)
of section 201.04, section 205.01, and subsection (9a) of section 101.10 of the statutes,
relating to the prevention of unemployment by compensating workmen while temporarily
unemployed, providing penalties, and making an appropriation of fees
The people of the State of Wisconsin, represented
in senate and
do enact as follows:
SECTION 1. T w e n t y new sections a r e added to t h e statutes, to r e a d :
112.01. T h e following terms, expressions, a n d phrases, a s used in this
chapter, shall be construed a s follows:



(1) The term "employer" shall mean every person, firm, and private corporation, who shall, at any time after the date when this chapter takes
effect, have six or more employees in a common employment. But the term
" employer" shall not include farmers. Any employer who has been subject
to this chapter upon his showing to the satisfaction of the industrial commission that at no time during the previous twelve months he has employed
six or more employees and that all his liability for compensation or for
insurance is discharged or provided for, shall (until such time as he again
employs six or more employees) cease to be an employer within the meaning
of this chapter.
(2) The term "employee" shall mean every person in such a common employment in the service of an employer under any contract of hire, express
or implied, oral or written, including all helpers and assistants of employees, whether paid by employer or employee, if employed with the knowledge, actual or constructive, of the employer, and also including minors of
permit age or over. But the term " employee " shall not include persons—
(a) Who are engaged in farm labor;
(b) Whose employment is not in the usual course of the trade, business*
profession, or occupation of the employer;
(c) Whose income from employment other than manual labor is at the
rate of one thousand five hundred dollars or more per year.
(3) The expression "weeks of employment" shall mean the total weeks
of employment by one or more employers during which the employer or
employers were liable for compensation under this chapter.
(4) An employee shall be deemed partially unemployed when his usual
weekly work is reduced to such an extent that his weekly remuneration or
wage is less than seventy-five per cent of his usual weekly remuneration or
(5) The term "compensation" shall mean compensation for total or partial
112.02. (1) Whenever in any industry or class of employment it is customary to operate only during a regularly recurring period or periods of less
than one year in length, then the employer's liability for compensation and
his obligation to insure this liability shall apply only to the longest seasonal
period or periods which the best practice of such industry or class of employment will reasonably permit. The industrial commission shall ascertain
and determine or redetermine such seasonal period or periods for each such
seasonal employment. Until such determination, no employment shall be
deemed seasonal.
(2) Whenever in any establishment it is customary to afford a regularly
recurring vacation period, then the employer's liability for compensation and
his obligation to insure this liability shall not apply to such vacation period.
The industrial commission shall ascertain and determine or redetermine such
vacation periods. Until such determination, no period of unemployment shall
be deemed a vacation period.
(3) Whenever in any industry or class of employment it is customary to
engage employees for a term of three days or less, then the employer in such
industry or class of employment shall owe compensation beginning with the
day of filing claim as provided in section 112.07. The industrial commission shall
ascertain and determine or redetermine the casual employments to which
this section shall apply. Until such determination no employment shall be
deemed casual.
112.03. The liability of an employer for compensation shall arise whenever
after June 30, 1926, an employee leaves or loses employment with an employer.
The amount of the liability shall be determined by the provisions of sections
112.04, 112.05, 112.07, and 112.08.
112.04. (1) Compensation shall be payable weekly by the last employer of
an employee or by the insurance company with which he may have insured his
liability under this chapter and shall accrue:
(a) Beginning with the third day after filing claim (except in casual employments in which it shall accrue beginning with the day of filing claim) to an
employe totally unemployed, if of permit age, at the rate of 50 cents for each
working day including half holidays; if above permit age, at the rate of $1
for each working day including half holidays: Provided, however, that na
employee shall be compensated at a higher rate per we,ek than 65 per cent of
his usual weekly remuneration or wage in his last employment by an employer.




(b) Beginning with the day of filing claim to an employee partially unemployed, at the above rates reduced proportionally to the reduction in his usual
weekly remuneration or wage.
(2) Compensation shall not accrue to an employee either for more than
thirteen weeks in a calendar year or in greater ratio than one week of compensation to four weeks of employment during the two preceding calendar
(3) For the purpose of computing the number of weeks during which compensation may accrue to an employee, any period during which an employee
receives compensation for partial unemployment shall be counted in the ratio
which this compensation bears to his maximum compensation for the same
(4) Employment by a person not an employer or by an employer in a seasonal employment outside of the seasonal period, as determined by the industrial commission, shall not terminate, but only suspend, the liability of a
previous employer. If the employee becomes unemployed within six months
of the cessation of his employment by such previous employer, compensation
shall again accrue upon his filing a claim against such previous employer
within one month of the cessation of his last employment.
112.05. (1) Compensation shall accrue to an employee as provided in section
(a) On condition that the employee has been employed by one or more
employers within the State not less than twenty-six weeks during the two
preceding calendar years;
(b) So long as he is continuously unemployed except as provided in subsection (4) of section 112.04;
(c) While he is capable of and available for ^employment and (unless only
partially unemployed) unable to obtain suitable employment and while he continues to report from time to time according to rules prescribed by the industrial commission.
(2) Suitable employment shall mean employment in his usual employment or
other employment for which he is reasonably fitted in the vicinity, as determined by the industrial commission, of his residence or last employment. But
an employee shall not lose his right to compensation if he refuses an employment as unsuitable:
(a) Because the situation is subject to conditions substantially less favorable than the prevailing conditions in his usual employment, but the conditions
shall not be deemed less favorable because the employment is likely to be less
permanent or because it is an employment to which compensation does not
Cb) Because the situation is vacant owing to the direct participation of a
previous occupant in an existing strike or lockout.
(3) An employee shall not be entitled to compensation:
(a) If he lost his employment through his misconduct;
(b) If he has left his employment voluntarily without reasonable cause;
(c) If he has left or lost his employment by reason of stoppage of work
•due to a strike against or lockout by the employer at the factory, workshop,
or premises at which he was employed, so long as the strike or lockout
(d) If his unemployment has been directly caused by an act of God.
112.06. No agreement by an employee to waive his right to compensation shall
be valid, and no compensation shall be assignable, subject to attachment, or
liable in any way for an employee's debts.
112.07 (1) Claims for compensation, in such form as the industrial commission shall provide, shall be filed with the deputy in charge of the employment
office in the district of the claimant's last employment, or other deputy designated by the commission for this purpose. Such claim shall be filed within
one month of the cessation of employment.
(2) (a) If the claim appears to the deputy invalid, he shall reject the
claim and notify the claimant in writing of such rejection and of his right to
make an application for a hearing. This application must be made within
three working days of such notification and in such form as the industrial
commission shall provide.
(b) If the claim appears to the deputy valid, he shall give written notice
of the claim to the claimant's last employer and notify him that he owes
compensation unless he contests the claim by filing with the commission, within
three working days after receipt of the notice, a denial of the claim in such



forms as the industrial commission shall provide. If such a denial is filed,
it shall operate as an application for a hearing.
(c) In case the employer does not contest the claim, he shall pay compensation so long as it is due under this chapter. Upon his failure to make proper
and prompt payments, the claimant may make, in such form and within such
time as the commission may prescribe, an application for a hearing.
112.08 (1) On application for a hearing or upon its own initiative, as provided in subsection (2) of section 102.17, the commission shall proceed in the
manner provided in sections 102.14 to 102.19, to hear and determine any contested claim for compensation.
(2) The industrial commission may provide for the hearing of contested
claims by local boards representing the employers and employees, and make
rules for the proceedings before such boards and for review or rehearing
before the commission.
(3) If the application for a hearing arises under paragraph (c) of subsection (2) of section 112.07, the employer shall be estopped to set up:
(a) That he is not the claimant's last employer;
(b) That the claimant was not his employee;
(c) That the claimant lost his employment through his own misconduct;
(d) That the claimant left his employment voluntarily without reasonable
(e) That the claimant left or lost his employment by reason of stoppage of
work due to a strike or lockout;
(f) That the unemployment was directly caused by an act of God.
(4) The provisions of sections 102.20, 102.22, 102.27, inclusive, and subsection (1) of section 102.28, shall apply, as far as may be, to claims and awards
for compensation under this chapter.
112.09 (1) Every employer liable for the payment of compensation, unless
be exempted as provided in section 112.10, shall insure such liability in the
employers' mutual employment insurance company hereinafter created. The
obligation to take out a policy shall take effect July 1, 1926, or as soon thereafter as a person not theretofore an employer becomes such, and premiums
shall be payable within ten days of the date when the employer is required
to take out a policy. Any nonexempt employer who fails to take out a policy
of insurance with the employers' mutual employment insurance company shall
nevertheless, be liable to such company for premiums at the same rate as if
he had taken out a policy.
(2) If it appears by the complaint or by the affidavit of any person in behalf
of the State or of the employers' mutual employment insurance company that
any nonexempt employer has failed to take out a policy with such company
or that any premium is due upon such policy and not paid, there shall forthwith be served on the employer an order to show cause why he should not be
restrained from employing any person in his business pending the proceedings
or until he shall have satisfied the court in which the m'atter is pending that
he has complied with the provisions for insurance or for payment of premiumSuch order to show cause shall be returnable before the court or the judge
thereof at a time to be fixed in the order not less than twenty-four hours nor
more than three days after its issuance. In so far as the same may be applicable and not herein otherwise provided, the provisions of chapter 268 relative
to injunctions shall govern these proceedings.
If the employer denies under oath that he is subject to the provisions of
this chapter, and furnishes bond with such sureties as the court may require
to protect all his employees who may leave or lose their employment after
the commencement of the action, then no temporary restraining order or
injunction shall be issued pending the trial. If no such answer is filed, or if
it appears upon trial unfounded, then the court shall issue an injunction restraining such delinquent employer from employing any person until he sha(ll
have satisfied the court that he has taken out such policy or paid such
(3) Liability for compensation shall not be affected or reduced by any insurance, contribution, or other benefit in respect of unemployment due to or
received by the employee entitled to such compensation.
(4) The claimant of compensation, in addition to the right to recover the
same directly from the employer may enforce in his own name, by proceedings
before the industrial commission in conformity with section 112.08, the liability of the employers' mutual employment insurance company, whether the
employer has taken out a policy of insurance or not, unless such employer



has been exempted from insuring his liability with the employers' mutual
employment insurance company under section 112.10, or the liability of such,
company in which an exempt employer may have taken out a policy as provided in section 112.10; provided, however, that payment in whole or in part
of such compensation by either the employer or a company shall, to the extent
thereof, be a bar to recovery against the other of the amount so paid, and
provided, further, that as between the employer and a company, payment by
either directly to the claimant shall be subject to the conditions of the insurance policy, if any, between them; and that as between the claimant and a
company, the failure of the assured to do or refrain from doing any act
required by the policy shall not be available to the said company as a defense.
112.10. (1) An employer desiring to be exempted from insuring his liability
for compensation in the employers' mutual employment insurance company
shall make application to the industrial commission, showing either Ms financial
ability to pay such compensation or else insurance with a company authorized to transact employment insurance under subsection (5) of section 201.04
of the statutes; whereupon the commission by written order may grant, on
or after February 1, 1926, such exemption upon payment by the employer
of the fee provided in section 112.17. Such exemption shall take effect on the
next January first or July first. Until such exemption takes effect, every
employer shall have all the rights and obligations of a nonexempt employer
including membership in the employers' mutual employment insurance company. As a condition to granting exemption, the commission may require the
employer to furnish such security as it may consider sufficient to insure payment of all claims for compensation. Where the security is in the form of a
bond or other personal guaranty, the commission may, at any time either
before or after the entry of an award, upon ten days' notice and opportunity to
be heard, require the sureties to pay the amount of the award, the same to be
enforced in like manner as the award itself may be enforced.
(2) (a) The commission may from time to time require further proof of
financial ability of any exempt employer or of his insurance with a company
authorized to transact employment insurance under subsection (5) of section
201.04 of the statutes. Upon his failure to satisfy the commission of such
ability, upon his entering into any agreement for insurance coverage with an
insurance company or interinsurer not licensed to operate in this State, upon
his wilful failure or that of the insurance company in which he may have
insured, to furnish any reports that the commission may require in pursuance
of this chapter, or otherwise to comply with provisions of this chapter and
the rules, regulations, and orders of the commission pertaining to the administration thereof, the commission may, upon ten days' notice and opportunity
to be heard, revoke his exemption and shall notify the employers' mutual
employment insurance company of such revocation.
(b) An employer .may terminate his exemption January 1 or July 1 of any
year upon 10 days' notice to the industrial commission and to the employers'
mutual employment insurance company.
(3) If exemption ceases owing to the provisions of subsection (2) of this section, it shall be the duty of the employer to insure according to the provisions
of section 112.09. Such an employer shall pay to the employers' mutual employment insurance company, in addition to his current premium, his pro rata
share of the excess of premiums over losses and expenses developed during
the period of his exemption by the industry or group in which he has been
classified by the compensation insurance board for the purposes of this
(4) An exempt employer may, with the approval of the industrial commission, substitute for his liability under this chapter equal or greater liability to
his employees under a plan which will, in the opinion of the commission, give
to every employee protecton equivalent to or greater than that which is given
by this chapter. Any such plan may include the use of the agencies named for
carrying out this chapter and shall provide for review by the industrial commission and the courts, as provided in section 112.08, of contested claims
arising under such plan. If at any time any such plan or its administration
fails to meet the standards herein provided, the industrial commission shall,
upon ten days' notice and opportunity to be heard, withdraw its approval,
whereupon the employer's liability under such plan shall cease to be a substitute for his liability under this chapter.
112.11 (1) There shall be created, for the purpose of insuring the liabilty of
employers under this chapter and of preventing unemployment, an employers*



mutual employment insurance company. Such company shall be deemed to
insure all the liability for compensation of all employers under this chapter
who have not been exempted from insuring in such company under the provision of section 112.10. The compensation insurance board shall fix a place
in Madison and a time between September 1, 1925, and January 15, 1926, for
the meeting of employers required to insure their liability, for the purpose
of organizing and incorporating the company, and shall give public notice of
such meeting at least thirty days in advance. Each employer or his authorized
agent shall be entitled at such first meeting to one vote for each one hundred
•employees or fraction thereof. The meeting shall provide for incorporation
as a mutual insurance company and the provisions of chapters 201 and 205 relating to mutual insurance companies writing workmen's accident compensation
insurance shall apply so far as not inconsistent with the provisions of this
chapter. The member of the compensation insurance board chosen by the
board to preside at the meeting shall pass upon the credentials and voting
rights of persons attending the meeting.
(2) Not later than February 1, 1926, the employers' mutual employment insurance company shall collect and every employer who would then be required
to insure with the company if the requirement of insurance were already in
effect, shall pay a deposit premium of at least fifty cents for each employee
on his pay roll in the calendar month preceding that in which the organization
meeting of the employers was held, which sum shall be credited as prepayment
of premiums.
(3) During the period from July 1, 1926, to December 31, 1929, if the assets
©f said employer's mutual employment insurance company fall below the net
reserve and other liabilities of the company, as determined by the compensation insurance board, the compensation insurance board shall temporarily
reduce the periods for which compensation shall accrue under this chapter
to such reasonable periods as may secure the solvency of such company.
112.12. (1) The employers' mutual emplbyment insurance company and comX)anies insuring the liability of employers exempted under section 112.10 shall
make such reports as the compensation insurance board may require. The
compensation insurance board shall prescribe the forms and shall make rules
governing the filing and making of such reports.
(2) The employers' mutual employment insurance company and companies
insuring the liability of employers exempted under section 112.10 shall establish
separate funds by groups of industries, as may be directed by the compensation
insurance board, so that each of such groups of industries shall bear approximately the cost of its own unemployment.
(3) The employers' mutual employment insurance company and companies
insuring the liability of employers exempted under section 112.10 shall have
authority, subject to the approval by the compensation insurance board, and
in so far as it does not conflict with the authority hereinafter granted to the
•employment insurance rating bureau—
(a) To classify industries of this State that are subject to employment
insurance into proper classes for employment insurance purposes;
(b) To make inspections of risks and to apply thereto an experience rating
(c) To establish charges and credits under such system;
(d) To provide for refunds to employers on the basis of unemployment
(e) To investigate unemployment conditions and other material facts in
connection with compensation risks and to promote regularity of employment
and to prevent unemployment.
(4) Every contract for the insurance of the compensation herein provided
for or against the liability therefor, shall be made subject to the provisions
of sections 112.01 to 112.20, and provisions thereof inconsistent with sections
112.01 to 112.20 shall be void. Such contract shall be construed to grant full
coverage of all liability of the assured under and according to the provisions
of sections 112.01 to 112.20, notwithstanding any agreement of the parties to
the contrary unless the industrial commission has theretofore by written order
specifically consented to the issuance of a contract of insurance on a part of
such liability.
(5) No company shall enter into any such agreement unless such company
shall have been approved by the commissioner of insurance, as provided by



(6) For the purpose of sections 112.01 to 112.20, each employee shall constitute a separate risk within the meaning of section 201.17 of the statutes;
provided that no company organized by employers under subsection (5) of
section 201.04 shall be licensed or authorized to effect such insurance unless
at least five employers shall join in the organization of such company and
unless such company shall have in force or put in force simultaneously insurance on at least one thousand five hundred separate risks.
112.13. Every company transacting the business of insurance of loss due
to unemployment in this State, including the employer's mutual employment
insurance company, shall be a member of a bureau to be maintained for the
following purposes:
(1) Subject to the approval < f the compensation insurance board—
(a) To classify industries of this State that are subject to employment
insurance into proper classes for employment insurance purposes;
(b) To m&'ke inspections of risks and to apply thereto an experience rating
(c) To establish charges and credits under such a system;
(d) To provide for refunds to employers on the basis of unemployment
(e) To investigate unemployment conditions and other material facts in
connection with compensation risks and to promote regularity of employment
and to prevent unemployment.
(2) To assist the compensation insurance board and companies in making
and approving rates and in carrying out the insurance features of this
112.14. The compensation insurance board shall fix a place and time within
thirty days after the organization of the employers' mutual employment insurance company, for the purpose of organizing the bureau and shall give
notice of such meeting at least ten days in advance to all insurance companies authorized to transact employment insurance in this State. Each
such company shall be entitled at such first meeting to one vote. The bureau
shall make by-laws for its government and for the government of its members. Such articles and by-laws and all amendments thereto shall be filed
with and approved by the compensation insurance board and shall not be
effective until so filed and approved. Such bureau shall admit to membership any company authorized to transact employment insurance in this State.
The charges and services of such bureau shall be equitable and nondiscriminatory as between member companies.
112.15. The provisions of sections 205.01 to 205.26, relating to the accident
compensation insurance rating bureau and companies writing accident compensation insurance, shall apply to the employment insurance rating bureau
and companies transacting employment insurance, in so far as they do not
conflict with the provisions of this chapter.
112.16. (1) The minimum pure premiums which any company insuring loss
due to unemployment shall charge, shall be subject to approval by the compensation insurance board and shall not be effective until approved by the
board. It shall approve only of minimum pure premiums that are fair and
adequate for the various industries to which they apply over a period of
years and which do not discriminate unfairly between risks or industries.
Such premiums shall be modified by such a system of experience rating as the
compensation insurance board may approve, which shall not be effective or
used until so approved. The application of such system shall not discriminate
unfairly between risks or industries. The board shall also approve of maximum
and minimum expense loadings to be incorporated in premiums collected
on such business in1 this State.
(2) The compensation insurance board, either upon its own motion or
upon written complaint of any employer who is aggrieved by any rate, rule,
or classification affecting him made by any company authorized to write employment insurance or by the rating bureau, shall have power to review
the acts of such company or rating bureau and to make findings and orders
requiring compliance with the provisions of this chapter. The proceedings
shall be governed by the provisions of section 205.11 of the statutes and the
findings and orders shall be subject to summary review by the circuit court
of Dane County, as provided in said section.
112.17. (1) Ten cents of each one dollar of total premium received under
the provisions of this chapter by any insurance company authorized to transact
employment insurance, shall be paid to the treasury of the State of Wiscon



sin. The amount of such payments due to the State of Wisconsin shall be
determined by the compensation insurance board and, upon certification by
the compensation insurance board to the State treasurer, shall be payable
as a debt to the State at such times and intervals as the compensation insurance board may direct.
(2) An equivalent annual fee determined by the compensation insurance
board, shall be paid by exempt employers who have not insured their liability
under this chapter. The compensation insurance board, after a hearing, shall
classify every such employer in the industry or group to which he would belong if he were insured in the employers' mutual employment insurance company and shall determine his fee at ten per cent of the estimated amount of
the total premium at the manual rate exclusive of experience rating, which
he would owe t6 the employers' mutual employment insurance company but
for his exemptioji. This fee shall be payable in advance to the treasury of
the State of Wisconsin in the month of January (or the first month of the
employer's fiscal year, if the compensation insurance board shall so permit),
except as provided in section 112.10. At the end of the calendar year or the
employer's fiscal year, such employer shall furnish the board with a true
statement of his actual payments to the State of Wisconsin during the said
calendar or fiscal year and with information from which the compensation
insurance board may determine the total premium, at the manual rate inclusive of experience rating, which he would owe but for his exemption. If
the actual advance payment for the year is in excess of the amount due, the
difference shall be refunded or deducted from the fee for the succeeding year.
If the payment is less than the amount due, the difference shall be payable at
the same time as the fee for the succeeding year. The orders of the board
detering fees shall be subject to summary review by the circuit court of Dane
County as provided in section 205.11.
(3) Sums paid into the State treasury under the provisions of this section
are hereby appropriated to the industrial commission and the compensation
insurance board, under regulations to be prescribed by the State board of
public affairs, for the use of the industrial commission and the compensation
insurance board in meeting expenses incurred in administering this chapter
and in operating free employment agencies.
112.18. The industrial commission shall appoint a board, to be known as the
"employment advisory board," consisting of one member at large who shall
act as chairman, and an equal number of members to represent respectively
employers and employees, to be selected from lists submitted for that purpose
by employers and employees. The board shall meet on call of the industrial
commission, and shall assist the industrial commission without pay, except
for expenses, in investigations, determinations, and general administration of
this chapter.
112.19. It shall be the duty of the industrial commission, the commissioner
of insurance, and the compensation insurance board, within their respective
jurisdictions, and they shall have power, jurisdiction, and authority, to make
all investigations, classifications, rules, regulations, and orders, to require all
reports from employers and insurance companies reasonably necessary to
enforce the provisions of this chapter. Such investigations, classifications,
rules, regulations, and orders Und any action, proceeding, or suit to set aside,
vacate, or amend any such order of the industrial commission, the commissioner of insurance, or the compensation insurance board, or to enjoin the
enforcement thereof shall be made pursuant to the proceedings in sections
101.01 to 101.27, or pursuant to the proceedings in sections 200.01 to 200.16, or
pursuant to the proceedings in sections 205.01 to 205.11, as the case may be,
which sections are hereby made a part hereof, so far as not inconsistent with
the provisions of sections 112.01 to 112.20, and every order of said industrial
commission, commissioner of insurance, or said compensation insurance board
shall have the same force and effect as the orders issued pursuant to said
sections 101.01 to 101.27, sections 200.01 to 200.16, and sections 205.01 to 205.11.
112.20. (1) If, for the purpose of obtaining any compensation either for himself or for any otht>r person, or for the purpose of avoiding any payment to be
made by himself under this chapter, or enabling any other person to avoid
such payment, any person knowingly makes a false statement or false representation, he shall be guilty of a misdemeanor, and upon conviction he shall
be liable to imprisonment for a term not exceeding there months, with or without hard labor, or shall be fined an amount not exceeding five hundred dollars,
or both.



(2) Any person who buys, sells, or offers for sale, takes or gives in exchange or pawns or takes in pawn, any document, paper, or card provided
under the regulations of the industrial commission for recording the facts upon
which the claims of employees to compensation may be determined, shall be
fined an amount not exceeding fifty dollars.
(3) If any employer refuses or neglects to comply with any of the requirements of this chapter or the regulations, rules, and orders made thereunder,
or if any employer solicits, receives, or collects any money, or deducts or attempts to deduct from the wages or other renumeration of the employee,
either directly or indirectly, for the purpose of discharging any part of the
employer's liability under the provisions of this chapter, he shall forfeit ten
dollars for such offense. Each day's violation of continuing offense shall be
a separate offense.
(4) If any company, rating bureau, or any agent or other representative of
any company or rating bureau fails to comply with or is guilty of any violations of any of the provisions of this chapter, or of any order or ruling of
the commissioner of insurance or of the compensation insurance board made in
accordance with this chapter and with sections 205.01 to 205.06, and 205.11
of the statutes, such failure to comply or such violation shall be punished by
a fine of not less than fifty nor more than five hundred dollars. In addition
thereto, the license of any company, other than the employers' mutual employment insurance company, or of any agent or other representative of any
company or rating bureau guilty of such violation may be revoked or suspended
by the commissioner of insurance.
SEC. 2. Subsection (5) of section 201.04, section 205.01, and subsection (9a)
of section 101.10 of the statutes are amended to read:
"(201.04) (5) Liability insurance.—Against loss or damage by the sickness,
bodily injury, or death by accident of any person, against loss or damage to
the property of any person by accident, and against loss due to unemployment,
for which loss or damage the insured is liable."
205.01. The word " company" whenever used in this chapter means any insurance carrier authorized, by license issued by the department insurance, to
transact the business of workmen's compensation insurance or insurance
against loss due to unemployment in this State. The phrase, "merit or
schedule rating" shall, for the pupose of employment insurance, include experience rating. Reference in this chapter to companies writing workmen's
compensation insurance shall apply to companies writing insurance against loss
due to unemployment.
101.10. (9a) Any county, city, town, or village may enter into an agreement
with the Wisconsin industrial commission for such period of time as may be
deemed desirable for the purpose of establishing and maintaining local free
employment offices, and it shall be lawful for any county, city, town, or village to appropriate and expend the necessary money to permit the use of
public property for the joint establishment and maintenance of such offices
as may be agreed upon.
The industrial commission may establish such free employment offices as it
deems necessary to carry out the purposes of sections 112.01 to 111.20 and all
expenses connected with the conduct of such offices shall be charged to the
appropriation to the industrial commission in subsection (3) of section 112.17.
SEC. 3. The provisions of sections 112.09, 112.11, 112.12, and subsections (1),
(2), and (3) of section 112.10 shall be inseparable from one another, but
separable from all other provisions of this act. If the above enumerated provisions shall for any reason fail, all other provisions relating to exempt
employers shall apply to all employers.
SEC. 4. This act shall take effect upon passage and publication.

NEW YORK, N. Y., February 7,



Powhatan Hotel:
Re letter sixth concerning preliminary reports of February, March, and April,
1928 issue, we consent that you submit them at Senate committee hearing conditional that corrections may later be made. These reports were distributed as



preliminary drafts to be checked for accuracy by contributors and authorities,
and will be published in book form later this year by us in comprehensive worldwide study of various form of unemployment compensation. Miss Mary B.
Gilson and Dr. Bryce M. Stewart are the authors. Corrections thus far
indicated are of relatively minor character, but if any parts are published
as Government documents, they should be subject to such corrections. If they
are regarded as valuable by Senate committee, you may submit them subject
to limitations above, but permission to use them for any other purpose can
not now be authorized. You may quote this telegram.


[Copyright 1928 : Industrial Relations Counselors (Inc.), 165 Broadway, New York,, N. Y.]

Every industrial depression of the last quarter century has given rise to a
somewhat short-lived interest in unemployment and a brief advocacy of such
relief measures as employment exchanges, the systematic release of public
works contracts, unemployment insurance, and various devices for the control
of the business cycle.
The depression of 1920-1921 was noteworthy in that it marked not only
the first determined effort for the enactment of unemployment insurance
legislation in this country, but also the establishment of most of the American
plans of unemployment compensation by organized industries, trade-unions
and individual employers.
These experiments attracted interest at the time and a considerable literature describing their provisicfns and procedure has grown up, but because
of their brief history little has been written as to actual experience. In the
period since their inception, adoption of labor-saving machinery and improvements in management technique have proceeded at an unprecedented
rate and it has been discovered that prosperity and increased productivity may
also have their bread lines. The general trend and manufacturing employment
has been downward since 1920 while production has increased, and though
some or all of the workers released may have been absorbed in other lines (a
matter on which we have little quantitative data) during the lag between
the two processes may have involved much suffering. This " technological"
unemployment has been reinforced by that involved in the slackening of a
number of industries in the last six months or more and evidences are at
hand of a renewed consideration of the subject of unemployment on the part
of industrial leaders and social agencies. This situation would seem to lend
a timely interest to the study of unemployment compensation of which this
preliminary report on American experience is a part.
The entire study will be issued later in more complete form as one of the
research series of Industrial Relations Counselors (Inc.). Information concerning the operation of foreign laws will be included following visits to
the countries which have such measures. It is hoped that the final report
will be of practical use in the consideration of unemployment and of the efficacy
of unemployment insurance as one approach toward the solution of this problem.
An effort has been made to include all plans in the United States which are
primarily for the relief of unemployment. There are thus omitted plans aimed
solely at the stabilization of employment and those in which payments are
merely discharge bonuses. For the same reason the loan fund of the General
Electric Co. and the pension savings fund of the Joseph & Feiss Co. are not
covered, although both of them may be drawn on to tide over the emergency
of unemployment. Neither has payment of full week's wages to casual workers
who may only work a few days in the week—as, for example, is the case with
some of the Chicago packers—been considered within the scope of this report,
Abandoned and proposed plans have been discussed along with the active
Neither employers nor labor leaders have yet awakened to the value of
consistent record keeping as a guide for policy and employment, and unemployment statistics in the United States are conspicuously lacking. In few



companies is there a comparable basis for measuring adequately the results of
unemployment compensation. The information assembled is therefore presented without any attempt at evaluation. In the final report common factors
running through all of the plans will be examined and some indication given
as to their accomplishment.
Practically all of the data presented in this report have been assembled
through investigation at the headquarters of the companies and industries
involved and supplemented by correspondence with persons directly responsible
for the administration of the plans. In addition, advice and suggestions have
been obtained from competent authorities. A careful examination of all available reports previously published has been made and numerous misstatements
have been discovered, many of them due to reliance upon earlier reports rather
than upon original sources. Each of the descriptions has been examined by
persons in the companies or industries involved and indorsed as accurate;
it is hoped that any errors which may have crept in will be corrected and
subsequent experience added when the final study is published. Comments
and suggestions are solicited from all who read this preliminary report.
The descriptions of the plans have been grouped as follows: (1) Compajay
plans; (2) Joint agreements; (3) Trade-union out-of-work benefits. The co*mpany plans have been arranged chronologically. The joint agreements have
been arranged chronologically by industry.
In the final report which will be brought up to date so as to include data on
all phases through 1928, there will be included (a) additional data concerning
trade-union out-of-work benefits, through the courtesy of the research department of the American Federation of Labor, which is now undertaking to
assemble information covering such plans; (b) a description of the plan of
the Brown & Bailey Co., of Philadelphia, which has been so recently adopted
that there has been practically no experience to report; and (c) a description
and abstract of proposed laws covering unemployment compensation or insurance in the six States that have considered such legislation. (Item G is
presented in this report.)

The Columbia Conserve Co., of Indianapolis, is engaged in canning soups,
chili con carne, chicken a la king, chop suey, and bean sprouts. One of the
members of the family owning the plant is the active manager. This company
is noted for its excellent working conditions and for its unique system of
profit sharing, for its complete control by those directly engaged in production
and its provision for ultimate ownership by them, as well as for its almost complete substitution of salaries for wages. The last-named feature is so basic
to the unemployment compensation that it will be described later in some detail.
In 1927 the average number of salaried employees was 81, constituting 84.4 per
cent of the total number of employees. In January, 1928, there were 102 salaried workers, or 89.9 per cent of the total number* of employees. The number of
workers has varied in the last two years from 93 in June, 1927, to 294 in
September, 1926.
Total man-hours show wide variations also. Previous to the adoption of
the profit-sharing plan the normal hours were 55 a week. A 50-hour week
was put into effect in 1918, and although the hours are now only 45 a week,
longer hours are worked during peak loads when the council so decides. Salaried workers work longer hours when the occasion demands, without extra
pay, while wage workers are paid for overtime work. During the early years
of the^plan there was great seasonal variation in hours, a 70 or 80 hour week
being worked at the peak of the season. The length of hours has been reduced
by better management, and in 1924, a year of unusually great, output, 60 hours
a week was the maximum number of hours worked. An unusual feature in this
plant is that office workers work the same hours as the workers in the factory.
Vacations are three to four weeks in length, with full pay for salaried
The plant is closed on the following holidays: New Year's, Fourth of July,
Thanksgiving, and Christmas.
Many mechanical devices and improved methods have been introduced which
have reduced the required number of workers and the cost of operation. Workers have shown themselves eager and inventive in devising methods even though
they result in reduction of force.



There is a works council consisting of both salaried employees and wageworkers. Both classes of workers are eligible and have equal votes. The one
exception, exercised but once, is the right of employees who have been employed
more than a year to call for a revote, in which the workers of shorter length
of service do not participate.
This company has introduced a form of family wage payment. The minimum
weekly wake for a married man or woman whose wife or husband is not a
wage earner also and who has children dependent upon him or her is $28.50.
The minimum weekly wage for a single worker is $19. One dollar a week is
paid for each child under 16 up to a total income of $32.50.
Stabilization measures have consisted in introducing new products which can
be prepared during dull seasons, such as pork and beans and chili con carne.
In April, 1917, the president and part owner of the company, William P.
Hapgood, proposed a plan of conducting business which has been in operation
ever since. This plan included the phases of industrial relations already mentioned. In June, 1918, the original plan which applied to wage earners as well
as salaried employees was altered so that only the ,latter were eligible to
profit sharing and consequently to the employment guarantee. Except for this
one modification of the plan there have been no changes since its installment.

A yearly guaranty of full salary for 52 weeks, including vacations, is given
to every office and factory employee who is elected by his fellow workers to
the salaried group. People who are not placed on this salary basis of pay,
but remain wage earners, are guaranteed 50 hours' employment a week at a
fixed hourly rate during the period they are employed. These workers belong,
as a usual thing, to two classes: Those who are hired during the peak of a
season and are not employed much more than four consecutive months, and
those who have not as yet proven themselves satisfactory to the rest of the
organization, regardless of their length of service.
The plan provides that in case it becomes necessary to discharge a salaried
worker because he is not satisfactory, he is paid a discharge bonus of two
weeks' pay.
Workers are transferred according to departmental needs, their salaries not
being affected by such transfers.
If, because of stoppages or some other emergency beyond the control of the
workers, the plant can not furnish a ful.1 day's work to a wage earner, he is
nevertheless paid a full day's wage.
The plan now provides for automatically considering for membership in* the
salaried class every wage worker whose length of service amounts to six
months, but an obviously desirable worker may be admitted to that class much
sooner. Additional members are thus added to the salaried group except at
rare intervals when business does not warrant an increase in the permanent
force. It is increasingly desired by the present salaried group to retain in
the employ of the company only potential salaried workers and to weed out
employees who do not show themselves worthy of being included in this class.

Promotions and demotions from one class of workers to another are determined by the works council.
The council also handles all matters relating to discharge, it being impossible
to discharge a salaried employee without a vote to the council. A wageworker
may be discharged by his foreman, but he may appeal to the council for a
-hearing of his case. In slack times wageworkers are laid off, but salaried
employees are invariably retained on the pay roll.
Salaried workers are paid weekly, by check, for 52 weeks a year.



Inasmuch as all costs attendant upon the unemployment guaranty are charged
to current operating expenses and are not separated from the general expense
accounts, it is impossible to furnish any data showing the cost of guaranteeing
Although when the employment guaranty first went into effect some of the
less responsible workers took advantage of it by .remaining away from wrork
without sufficient reason, this abuse was soon checked by the censure of
their fellow workers.



As has been said, in dull periods wageworkers are the first to be laid oft.
In 1921, when business depression was very acute, only three salaried workers
were laid off, and since that time no salaried worker has been released because
of slack work. With the exception of 1921, it has always been possible to
keep salaried employees busy on cleaning or repairing when they have no
work on their regular jobs.
While it is not possible to submit data covering the entire life of the
employLnent-guaranty plan, the available figures for 1926 and 1927 show
fluctuations in numbers of workers, in man-hours worked, and in pay roll.
The maximum number of employees during these two years was 294 in September, 1926, and the minimum number was 93 in June, 1927, a difference of over
200. An example of the variation in man-hours is shown by the fact that 94
workers worked 16,219 hours in May, 1927, while 93 workers worked only
10,341 hours the following month, owing to a partial shut-down.
The number of salaried workers in June, 1927, was 90 and the following
month, 102, and the total number of workers rose suddenly from 93 to 123
during those two months. One of the most striking fluctuations in the number of employees was from 160 in August, 1926, to 294 in September, 1926,
while the hours of work more than doubled during that period. (See Table
1.) The sudden ripening of tomatoes or some similar emergency in relation
to perishable food products often accounts for marked fluctuations.
As has been stated, stabilization measures have consisted in introducing
new products. In 1908 only 7 per cent of the total output was handled during
the first six months of the year, but with the new lines added, the following
results were obtained:
1923, 23 per cent of total output produced first six months.
1924, 20 per cent of total output produced first six months.
1925, 22 per cent of total output produced first six months.
1926, 24 per cent of total output produced first six months.
1927, 29 per cent of total output produced first six months.
In January, 1928, Mr. Hapgood said:
" I believe that regularity of employment is absolutely necessary in order
to secure stability of attendance, intelligent cooperation in the management
of the business, and devotion to its welfare. It is the first step to the making
of a fine morale both as workers and citizens."
One of the workers who has been with the company since 1918 and is
known among his fellow employees for his frankness expressed the following
opinion of unemployment compensation:
".Our employment guaranty has been to me and many of my fellow
workers a medium through which we could look into the future.
" We, as workers, with the fear of unemployment removed, have made many
steps forward. Our brain, which in the past was blurred by worries caused
by the uncertainty of employment, is now becoming active. Those mechanically inclined have developed new machines and ideas to increase production
and save human energy. Social problems have become interesting because
of our ability to think clearer. This has brought us to the point where we
are cooperative, working as a group rather than as individuals."
TABLE 1.—Number of worJcers and amount of pay roll, Columbia Conserve Co.
Salaried e m Wage w o r k e r s
a t e n d of m o n t h ployees oat t h n d
of m n


N o v e m b e r . _„
December »







Total employees at e n d
of m o n t h


Total m a n hours
during m o n t h

17, 638
43, 526
24, 530

18, 634



T A B L E 1.—Number of workers and amount of pay roll, Columbia Conserve Co.—
Wage workers

Salaried employees


February. _


1,188. 51
1,218. 07
136. 60
235. 00
1, 680. 92
11,212. 07
4,317. 91
2,920. 81
534. 72

$456. 70
797. 38
575. 60
317. 00
326. 74
200. 84
2, 239.13
1, 904.22

9, 022. 30
9,029. 00
12,508. 50
7,062. 50
9, 567.45
9, 996. 30
9, 677. 00
12,137. 52

$9, 638.80
9,629. 46
12,050. 60
9, 783. 50
10,291. 93
10, 745.80
9, 530.30
11,669. 05
9,146. 75

10,415, 55
13,233. 07
12, 726. 57
14,314. 21
12, 597.81
12, 672.24


$10,095. 50
10,100. 50
10,946. 64
10,307. 79



Because the Dutchess Bleachery ( I n c . ) , of Wappingers Falls, N. Y., installed
a unique p a r t n e r s h i p and profit-sharing plan of which its unemployment compensation is a part, this organization h a s been the object of much attention a n d
On August 8, 1918, H a r o l d A. Hatch, vice president of Deering Milliken &
Co. ( I n c . ) , described t h e p a r t n e r s h i p plan to the operatives of t h e Dutchess
Bleachery ( I n c . ) . T h e unemployment fund w a s established in December,
1919, a n d benefits were first paid in February, 1920. Mr. H a t c h states it was
the result of " a desire to protect t h e regular employees as far as financially
possible against t h e fear of unemployment." Through mass meetings and the
publication of a news sheet t h e employees were informed, from time to time,
of the provisions of t h e plan.
T h e controlling company, Deering, Milliken & Co. ( I n c . ) , some time after t h e
p a r t n e r s h i p plan w a s inaugurated by them a t the Rockland Finishing Co., a
p r i n t and dye works a t Garnerville, N. Y., and a t the Dutchess Bleachery ( I n c . ) ,
installed unemployment funds a t both of these plants. The fund is now in
operation in the l a t t e r plant only.
The Dutchess Bleachery ( I n c . ) , is a bleachery a n d dye works. Inasmuch
a s it sells service a n d not merchandise, it is largely dependent upon the conditions of t h e textile industry for continuity of work, stabilization being
therefore largely controlled by conditions in another industry.
I n May, 1927, there w e r e 547 employees. The employment superintendent
estimated t h a t in 1926 about 85 per cent of the employees, exclusive of office
workers, were eligible for unemployment compensation, and of those eligible
t h e r e were 288 actual beneficiaries.
Only one group of employees, the folders, a r e members of a t r a d e union.
Owing to the n a t u r e of the work but few skilled workers are required.
The normal w T orking week is 48 hours. Records show t h a t some men have
worked 100 hours a week in emergencies, but no adequate records of regular
h o u r s worked a n d overtime a r e available. Vacations with p a y h a v e been
abandoned, a t least for the present. The p l a n t is closed on the usual six
The fact t h a t the company w a s making unusually large profits a t the time of
t h e establishment of the plan probably h a d something to do with the generous
provisions embodied in it. I n 1920 the Dutchess Bleachery (Inc.) w a s very
conservatively capitalized a t $1,350,000, entirely represented by 27,000 shares
of stock. Because of subsequent depression in the textile t r a d e s a n d the consequent drain on t h e unemployment fund, only $18,936 remained in t h e fund
on October 31, 1927.



1. Source of fund.—The unemployment fund is, as has been noted, part of at
general plan for the distribution of funds between dividends and wages. A.
dividend of 6 per cent is first paid from net profits to invested capital, after
which a sinking fund, sufficient to provide 6 per cent on the invested capital,
is set aside as a reserve fund for the payment of dividends in years when they
are not earned. (In 1921, the amount required to pay 6 per cent on invested
capital was approximately $85,000.) After thes^ amounts are set aside, a
further fund not to exceed the same amount is set aside to establish a sinking
fund to reimburse workers when the company can not furnish employment.
As stated in the handbook, issued by the plant:
"At the end of each year the board of directors of the Dutchess Bleachery
(Inc.), shall set aside from the net profits of the company, if any, a sufficient
sum to raise the sinking fund for capital's minimum wage to an amount equal
to 6 per cent on the invested capital. If, and after, this has been accomplished,
a further sum shall be set aside to raise the sinking fund to be drawn upon by
labor in times of unemployment to $85,000."
It was understood when the unemployment sinking fund was set aside that it
was to bear a ratio to capital invested and was to be increased and decreased
accordingly. If the fund exceeded the requisite amount at the end of the year,
the excess was to be distributed as profits to officers and employees of the
Originally the plan provided that the board of directors should first set
aside 15 per cent of the net profits of the company for an employee sinking
fund, before 6 per cent was set aside as a return to invested capital; the change
was made in January* 1922.
2. Definition of unemployment.—A worker is considered to be unemployed
in the sense of being eligible for unemployment benefits when the plant or any
department of the plant is closed temporarily on account of business depression or other cause not within the control of the operatives.
Holidays are not counted as unemployed time when employees work 48
hours a week, but they are so regarded in case the week is 35 hours or less.
3. Eligibility *for benefit.—Every employee on a piece-work or hourly basis
of pay is covered by the unemployment fund plan. Twelve months of consecutive service with the company must precede drawing of benefits; prior to
1922 the time was two months.
Temporary workers are sometimes hired with the understanding that their
work is to be temporary and that they are not eligible for benefits. The limit
of time a worker is considered temporary is 12 months; at the end of this
period he is transferred to the permanent pay roll.
If a worker secures employment elsewhere during periods, of unemployment
at the Dutchess Bleachery he does not forfeit any part of his benefit. If he
refuses to accept a job assigned to him in the plant in lieu of his own job,
he forfeits not only his unemployment benefit but his job.
4. Scale and duration of benefit.—If an employee works less than 48 hours
a week he is given half pay for any unemployed time within that limit. If,
however, the fund, drops below $50,000 he is allowed a benefit for the lost
time based on a 35-hour instead of a 48-hour week, but in no case shall a
person eligible to benefit receive less than 24 hours' pay per week unless the
fund becomes wholly exhausted. (The change to the 35-hour basis was madein 1922.) No provision is made for suspending the payment of benefits unless
the fund is exhausted. It is stated in the " Rules and Regulations " concerning
the sinking funds that the amount of $50,000 is understood to bear a ratio to
the pay roll and it is therefore possible to increase the amount in case of ai>
appreciable increase in the pay roll.
In computing hours worked per week for purposes of paying unemployment
compensation, overtime is not counted.
All half-time pay is based on an average weekly wage for hour workers and
on an average of the past month's wages for pieceworkers. Length of service
after 12 months and number of dependents do not affect the amount of benefit.
5. Transfers.—If a worker is transferred temporarily to a job paying a
lower rate, he is paid the rate of the new job. The employment manager
states, however, that " sometimes he prefers not to work at all unless he getshis old rate, so occasionally, in such cases, he is paid his old rate for a short
time job." If, during the time the man is working on a job not his own, the*
plant is closed down for lack of work, his unemployment benefit is invariably



based on his old job rate. If a department is discontinued, no benefit is paid to
people laid off permanently.
There is no formal method of training workers to do different jobs, the
foreman in each department being held responsible for teaching workers.

The routine in relation to the fund is handled by the paymaster. Appeals
in case of any dispute are taken to the board of management, consisting of 12
members, 6 of whom are elected by the board of directors and 6 by the board
of operatives from among their number.
Until January, 1927, beneficiaries were paid by cash in their regular pay
envelopes. After that date payments were made by checks, which were placed
in separate pay envelopes marked " Sinking fund."
The board of operatives consists of one member from each department and
is elected annually by secret ballot of all employees. Among the activities
of the board are the handling of sick benefits, the saving plan, and recreational
and educational activities and the initiating of any complaints concerning
working conditions, wages, etc.
The board of management deals with controversial questions and plant
problems, including hours, wages, grievances, and conditions of employment
and discharge, which are referred to them by the board of operatives. As a
matter of actual practice, the personnel director usually handles such matters
directly, but they may be taken to the board of management by employee representatives for discussion and action if so desired.
The regulations state:
"Any operative discharged for crime or continued neglect of duty shall forfeit the full amount of his or her share of the sinking fund.
"Any operative leaving without due notice of one week, or satisfactory
agreement with his or her foreman, shall forfeit the full amount of his or her
share in the sinking fund."

Records of the amounts contributed to the fund from time to time and the
dates of contributions could not be obtained, but, as has been stated, the amount
in the fund at the time of writing this report was $18,936.55. Both the capital
and wages' funds bear interest at 6 per cent and the interest on the unemployment fund has always been used for health benefits until 1926, when these
benefits had to be discontinued because of the diminishing of the fund. The
health benefits paid out of the eunemployment fund were as follows:
2, 516. 70
5, 392. 84
2, 535. 61
2, 276. 06
In a book entitled " Sharing Management with the Workers " 2 the author
says: "The employees' sinking fund is in reality an insurance fund against
unemployment and disability arising from illness or nonoccupational accidents
* * *. One-half of a worker's wages is also paid for the first week of unemployment due to occupational accident, the period not covered by the compensation laws of the State."
The management is unable to furnish records of the amounts paid out from
the fund in accident compensation in supplementing State awards.
As has been stated, it was understood when the unemployment sinking fund
was set aside that it was to bear a ratio to the pay roll and was to be increased and decreased accordingly. If the fund exceeded the requisite amount
at the end of the year the excess was to be distributed as profit to oflicers and
employees of the company. As* there has never been an excess since $85,000
Ben M. Selekman, Sharing Management With the Workers. A Study of the Partnership Plan of the Dutchess Bleachery (Inc.), Wappingers Falls. New York, N. Y., Russell
Sage Foundation, 1924.



was established as the maximum sinking fund, no distributions have been
Records of the amount of overtime worked during the operation of the fund
are not available, but for the last week of April, 1927, overtime amounted to
2,035 hours and for the week ending May 14 it amounted to 1,436 hours. Previous to the first of May, 1927, there was an average of 2,000' hours overtime
per week. These figures do not include overtime worked by mechanics, power
men, nor yard men. Records of average hours per employee worked during a
typical week each month in 1925 and 1926 show no consistent seasonal fluctuations. (See Table 2.)
TABLE 2.—Number of employees and hours iiyor'keiL, Dutchess Bleachery
number of man-hours
on payroll during a
during a





Total average. _

27, 602
22, 696



number of man-hours
on payroll during a Average
during a


53.6 January—
51.4 February
45.6 March
42.4 April
43.8 May
42.6 June
45.1 July
42.9 August
46.3 i September
41.9 j October
42.5 November
48.6 December




19, 697
18, 581
19, 278

Total average—_


It is evident that the greatest amounts were paid out in benefits during the
first four years after the fund was established. Because of the impossiblity
of procuring annual figures of the number eligible or any labor turnover data
or records of plant or department idle time, it is not possible to state just
how far the fund was able to* meet the demands on it.
Since June, 1922, when the fun fell below $50,000, benefits have been paid
on the basis of 35 hours a week or less. On this basis every operative receives
a minimum of half-time, but not less than 24 hours, when he works 13
hours or less. If he works over 13 hours he is paid for the time he works,
plus half the difference between that and 35 hours.
The employment superintendent stated that at times when it is necessary to
lay people off for lack of work the company naturally lays off employees of
shorter length of service, and consequently amounts of benefits paid out do not
reflect' acute unemployment in case large numbers of employees ineligible to
benefits because of their less than a year's service are laid ofit
Records of the total number of employees on the pay roll during a typical
week each month in 1925 and 1928 indicate that the greatest number of
workers were employed during the first five months of each of those years.
(See Table 2.)
In March, 1921, H. A. Hatch, vice president of Peering, Milliken & Co.
(Inc.), stated:
"No criticisms, either personal or secondhand, have so far reached me,
although I have made repeated inquiries. On the other hand, the advantages
of the funds have inspired many favorable comments by operatives. All one
can say at present is that this fund has, to date, relieved all members of the
partnership from the fear of joblessness. And another thing that can be
said now is that we work with a far different and better will with each
other than we did formerly, each for himself."8
In November, 1921, at the annual meeting of the Academy of Political
Science, Mr. Hatch said:

American Labor Legislation Review, Vol. XI, No. 1, March, 1917, pp. 43-44.



" The testimony both from representatives of the operatives and from the
managers of the plants is unanimously to the effect that the unemployment
funds have so far adequately protected the operatives." 4
This was said in the face of severe unemployment, but it must also be
remembered it was in the early history of the fund.
In a letter from Mr. Hatch, dated July 11, 1927, the statement is made that
" the weakness of the plan is that it depends for its fund upon the ability of
the individual company to earn in excess of what is considered a fair wage on
capital, i. e., 6 per cent. Manifestly, if there are no excess earnings over this
amount, the fund becomes gradually exhausted."
In the same letter Mr. Hatch said:
"Although the withdrawals from the unemployment fund have not been large
during the past four years, they have been beneficial. I think they have
unquestionably reduced our labor turnover."
RocMand Finishing Co., Gamerville, N. Y.
(Fund exhausted)

The Rockland Finishing Co. is, like the Dutchess Bleachery (Inc.), one of
the Deering, Milliken & Co. (Inc.), plants. It is a print and dye works, and
is located at Garnerville, N. Y.
In November, 1927, there were 650 employees, including factory and office
workers. When the fund was established in 1920 there was an average annual
total enrollment of 846 of whom 758 were eligible to unemployment compensation.
The general scheme of management of the Rockland Finishing Co. is like
that of the Dutchess Bleachery (Inc.), the board of operatives and the board
of management having similar powers and the same profit-sharing plan being
found in both plants.
Printers, engravers, and folders are the only unionized crafts in this plant.
The first contribution to the unemployment fund was $100,000 on January 1,
1920, and the first benefits were paid on April 21, 1920. On account of industrial depression and the unusua.1 demands on the fund it was exhausted on
June 30, 1923.


The provisions of the plan were the same as at the Dutchess Bleachery
(Inc.), except for the amount set as a maximum fund before profits could be
distributed, which was $120,000.
The following notice was posted in the plant on April 21, 1920:
" Payment will be made this afternoon from the employees' fund to such
employees who have not worked full time, through no fault of theirs, over the
period from January 1 up to April 3. (Viz, half-time for all time lost under
35 hours per week, where a person has not worked at all, or where one-half
the lost time added to the time worked does not equal 24 hours per week, the
person will be paid suflicient to equal 24 hours in each week.)
" The provision for payment from this sinking fund can best be illustrated
from the following:
" 1. If an employee works four days—35 hours—or works any part of four
days and makes 35 hours nothing is due him from the sinking fund.
" 2. If an employee works three days, as follows: Monday, 8% hours;
Tuesday, 8% hours: Wednesday, 8% hours; total, 26% hours. Guaranteed
one-half time for time less than 35 hours: 35 hours minus 26% hours is 8%
hours. Eight and three-fourths times one-half equals 4% hours. Due from
sinking, fund, 4% hours. Total hours, 26% plus 4% equals 30% hours.
" 3. If an employee works two days as follows: Monday, 8% hours; Tuesday,
8% hours; total, 17% hours. Guaranteed one-half time for time less than 35
hours: 35 hours minus 17% hours is 17% hours. Seventeen and one-half
times one-half equals 8% hours. Due from sinking fund, 8% hours. Total
hours, 17% plus 8% equals 26% hours.
"4. If an employee works one day: Monday, 8% hours; 35 hours minus 8%
hours is 26% hours. Twenty-six and one-fourth times one-half equals 13%
* Proceedings of the Academy of Political Science, New York, January, 1922, pp. 23-24.





hours. Employee is guaranteed 24 hours, therefore must be paid 24 minus
8% equals 15% hours from sinking fund. Total hours, 8% plus 15*4 equals
24 hours.
" 5. If an employee does not work at all he receives pay for 24 hours from
the sinking fund."

The plan was administered in the same maimer as at the Dutchess Bleachery
(Inc.). The board of management, however, consisted of 14 members at Rockland as contrasted with 12 members at the Dutchess Bleachery (Inc.).
Benefits were paid in the regular weekly pay envelopes.

It is unfortunate that the Rockland Finishing Co. can not furnish a picture
of monthly fluctuations in employment, turnover, unemployment compensation,
etc., covering the life of the unemployment fund, as this was one of the first
companies to establish such a fund, and, even though it was exhausted in a
little over three years, detailed experience relating to it would furnish valuable
Beginning with the first contribution of $100,000, the fund was finally built
up to the sum of $106,279.95, the dates of contributions being as follows:
Jan. 1, 1920
$100, 000. 00
Dec. 10, 1920
2, 959. 06
Sept. 10, 1921
2,110. 86
Jan. 1, 1922
549. 63
Dec. 31, 1922
510. 77
Oct. 20, 1923
106, 279. 95
Operatives were paid half pay on the basis of a 35-hour week.
The amount paid out in benefits during 1920 and 1921 was a severe drain on
the fund, as is shown by the following figures:



1923 1

N u m b e r of
a n n u a l enbeneficir o l l m e n t of

t o t a l enrollment

Average ann u a l payroll

590 $1,113,488. 01
885,809. 32


Cost of
benefits i n benefitsg e e r
relation t o e m p l o y ep

35, 565.81
5,979. 32

Per cent

$67. 21

First six months.

The average cost of benefits in relation to pay roll, during the entire life
of the plant was 2.6 per cent. The largest sums were paid out in benefits during October, November, and December of 1920, and in January of 1921. During
these months $80,0Q0 was paid out in 13 weeks, every employee who was eligible being guaranteed a minimum of 24 hours' pay per week in spite of the fact
that, because of depression in the cotton-textile industry, the plant was almost
completely closed down.
Amounts of benefits paid monthly during the existence of the fund were as
July _-.



_ _ __





763. 23
1, 576.09
1,847. 32
30,804. 66

2,428. 09
1,935. 35
1, 708.47
2,027. 26
614. 04
643. 93

$483. 50
177. 57
262. 81
147. 35
731. 20
556. 31
2,189. 02


35, 565. 81

5,979. 32


760. 09

1,091. 83



No data are available showing employment fluctuations and labor turnover.
The firm reported in October, 1927, " Records of discharges, lay offs and voluntary qu.ts are only kept five years, and such records as would cover that period
have already been destroyed." However, one of the executives states, "Although no records are now available we do know positively that at that
time the labor turnover was exceptionally low due to the aid received from the
unemployment insurance fund. It had a very marked effect upon keeping
the turnover at its lowest.
Because no information is available concerning exact periods when the
basic week was 48 hours, and when it was 35 hours, it is impossible to estimate
how much the reduction of amounts paid out in benefits is due to the reduction
of hours paid for and how much is attributable to an increase in employment.
In October, 1927, the executive secretary of the board of management stated,
"We still feel that there might be something to this plan even though the
depression lasted longer than we expected. Had the idea or ginated with the
company several years previous to 1920, a much larger sinking fund would have
been built up and probably would have carried us over the depression. As
an industry we are making very marked progress, and we hope that the time
will come when we can give the matter of unemployment insurance further

The Dennison Manufacturing Co. manufactures boxes, tags, and a great
variety of paper novelties crepe paper. It is considered one of the
most progressive organizations in America, and, with the leadership of Henry
Dennison, has shown courage and initiative in management methods and
industrial relations policies.
The main factory is in Framingham, Mass.; the other factories are in Marlboro, Mass., and London, England. This report will cover the Framingham
and Marlboro plants which are regarded as a unit.
The total number of employees in all plants, stores, and domestic offices was
4,133 in May, 1927, of which number 3,438 were employed in the Framingham
and Marlboro plants. There are 3,336 employees covered by the unemployment
compensation plan, of whom 2,982 are workers in the Framingham and Marlboro plants. It was only recently that all salaried workers, including those in
the score of offices scattered throughout the country and executives in these
offices, became eligible for unemployment benefits. Although in actual practice it has not been necessary to consider the question of unemployment in the
selling division, these employees are classified as eligible.
Total pay-roll hours have been reduced by a large number of minor installation of improved mechanical devices as well as by improved methods of planning, rout ng, and scheduling work which have done a great deal to cut down
delay time and thus increase productive efficiency. The linotype, monotype,
and the Ludlow machines have reduced the force of compositors from 30 to 15.
Electric trucks and conveyors have decreased the amount of unskilled labor
by a considerable percentage, while improvements in the craping machine and
cutting machine have resulted in cutting down the labor force required by
from 20 per cent to 40 per cent. Split operations and the introduction of belt
assembly work have also contributed toward the reduction of the number of
workers required.
The Dennison Manufacturing Co. is an open shop;. the printing pressmen,
the electrotypers, the compositors, and the guillotine cutters are organized.
The working week is 48 hours, eight and three-quarter hours, five days a
week and four and a half hours Saturday. The regular night crew consisting of
about 50 men works a 53-hour schedule, 12 hours on Monday, Tuesday, Wednesday, and Thursday, and five hours on Friday. The night employees themselves requested this division of hours, preferring tlie longer week-end of
leisure to the shorter working night.
There are nine holidays: New Year's Day, Washington's Birthday, Patriot's
Day, Memorial Day, Fourth of July, Labor Day, Columbus Day, Thanksgiving,
and Christmas. Holidays are not counted as unemployed time.
One week's vacation with pay is granted to all hourly employees with
over 10 years' service, and two weeks with pay are given to all hourly employees of 15 years' service. When an employee has been with the firm 25



years he receives pay for holidays and an employee of 30 years' service receives pay up to two full weeks when out on account of illness. Employees
on a salary basis receive two weeks' vacation with pay and are also paid for
holidays and for sick time not to exceed two full weeks. Vacations are staggered from July 1 to Labor Day and everywhere except the box division departments are kept running with about three-quarters of the crew. Any
employee is permitted to take a two weeks' vacation at any time of the year
provided it does not interfere with production requirements, but as a matter
of fact nearly everyone takes vacations during the summer.
For some years preceding the adoption of the unemployment plan, Henry
Dennison, the president of the Dennison Manufacturing Co., had bent every
effort toward interesting both his production and sales executives in stabilizing
employment/ Because of the nature of the product and the traditions surrounding the production and distribution of many of the articles during the
holiday seasons, it was a long and arduous process to achieve anything approaching steady employment. The stabilization methods have included planning ahead, budgeting sales, and personnel; educating customers through intelligent salesmen; manufacturing staples for stock; arranging for workers'
vacations without pay when they are requested and when the conditions of
business permit; weeding out inefficient workers in order that the production
of those remaining may be steady and dependable; and other equally important measures. Because of the great diversity of products and the success
which has met these efforts toward regularization, seasonal fluctuations are
practically, nonexistent at present.
By 1916 the peaks of unemployment had been fairly well ironed out, but the
directors, foreseeing the possibility of future uncontrollable depressions, and
recognizing the impossibility, even with the most careful planning, of completely eliminating the hazards of irregular work, set aside the sum of $20,000
toward an unemployment fund. 1917, $35,000 was added; in 1918, $35,000;
and in 1919, $50 000, making a total of $140,000, which with interest accruals
amounted to $147,237.18 at the end of 1919.
In 1919 employee representation took form in the organization of a general
works committee, and the president of the Dennison Manufacturing Co. referred to it the matter of considering the problems attendant upon unemployment and the spending of the unemployment fund for purposes of relief. The
general works committee and the management appointed a conference committee to draw up provisions governing the use of the fund, and on November 15,
1919, this subcommittee presented its recommendations. The plan was put
into effect in March, 1920.
The Dennison unemployment fund is closely interrelated with other activities of the organization, in particular with profit sharing and employee representation. The large group of profit sharers, which includes workers and executives of five years or more length of service, insures a widespread desire to
conserve the fund, and a healthy works council insures relative fairness in the
distribution of benefits and in settling the issues relating to lay offs, transfers,
and discharges.
In connection with this plan two things are especially stressed; first, that
prevention of unemployment is more important than its relief, and second,
that the plan has connected with it no guarantee of permanency. Because
of this emphasis on prevention, methods of stabilization have been given an
unusual amount of intelligent direction. The term " insurance " is consistently
avoided to-day just as it was when the plan was instituted so that there may
be no reason for thinking of it as permanent.
In the articles governing the control and use of the unemployment fund
it was stated that inasmuch as the company could not entirely foresee the
rise and fall in the demand for its product and could not therefore guarantee
continuous employment to any fixed number of people at all times, it had
done what seemed to it the next best thing, which was " to set aside * * *
certain definite sums of money * * * for the partial relief of the distress
due to unemployment." It was clearly stated that, while employees could
have "no unlimited guaranty against the evils of unemployment," they could
at least have " definite and positive assurance concerning the sum of money
which stands between them and those evils." The purpose in establishing
the fund was thus clearly stated.
The company's attitude toward the unemployment fund has been outlined
in the following published statement:
" I n the first place, it is not charity; it has a business basis and must
rest upon considerations of mutual advantage, with mutual self-respect.



This business basis it must find in securing and retaining better employees,
in better work on the part of employees, due to their release from the risk of
periodic total loss of income through unemployment, and in a steadier working
force due to the abrogation of the risk that the employee will find permanent
work elsewhere during times when he is unemployed."
In examining the minutes of the general works committee it is evident that
the workers were taken into the full confidence of the firm and that the
committee felt their responsibility for working out safe and fair provisions.
Both consulted literature on the subject, including a study of the British
unemployment act. Because of lack of precedent, they felt their way step
by step, and the minutes bear evidence to the amount of thinking and discussion that went into the shaping of provisions and their modification from
time to time. The necessity of conserving the fund and of making benefits
conform to its size, the purpose of the fund to relieve only when every
effort to prevent unemployment had been exhausted, motivate the various
measures adopted from time to time in relation to the use of the fund. Alterations in the plan since its inception are discussed elsewhere in this report.

1. Safeguards of fund.—The articles governing the control and use of the
unemployment fund, as revised April 1, 1922, and now in effect, state:
" The articles relating to rates of compensations shall automatically become
amended whenever the amount in the fund falls below $50,000 or whenever
the total disbursements from the fund during 12 consecutive months shall
exceed $50,000."
The following safeguarding machinery is outlined in the above-mentioned
" Whenever the accounting department shall report to the unemployment fund
committee that the total amount of money in the fund is less than $50,000 or
that the total disbursements during 12 consecutive months have exceeded
$50,000, then no further disbursements shall be made from the fund according
to the rules and rates provided in these articles unless and until one of two
things happens: The management and the works committee may reach some
new agreement or else the lapse of t^me or additions to the fund may remove
the $50,000 restriction. Until either of these two things happens the fund shall
be disbursed according to the rates and rules which were in effect during
January, 1921."
It is further stipulated in the articles of 1922 that " the unemployment fund
committee shall keep in touch with the condition of the fund and allow the management and works committee sufficient time to consider its new recommendations before the $50,000 point is reached. In this way whatever amendments
are deemed necessary to conserve the fund may be made without any lapse in
the provisions of tbese articles."
Although originally the unemployment fund was set aside as a special fund
and handled by appointed trustees, later it was made part of the general reserve, exactly in the same category as reserves for depreciation and other
purposes. Because of this change the profit sharers, who are naturally concerned with the reserves, became deeply concerned in 1927 on account of the
increased expenditures for unemployment despite increased business. They
therefore directed attention particularly to the costs involved in transferring
workers, and as a result various recommendations have been made with the purpose of reducing these costs. The profit sharers naturally see in the reduction
of the general reserve fund an ultimate reduction of profits in case it may be
decided to renew the fund at some later date. The amount available for unemployment payments at the of 1927 was $123,495.06, which was in the
eyes of those concerned a sufficient signal for action.
In mentioning safeguards it should be noted that the recommendations of
the unemployment fund committee in March, 1927, were made, as were those of
the special committee on unemployment and the factory accounting committee
during the same month, with the idea of putting especial safeguards around the
fund. It was recommended at this time that all charges to the unemployment
fund be abolished and the expense of unemployment, lay-offs, and transfers be
charged one-half to the merchandise committee and one-half to the producing
departments. It was also recommended that there be more scientific determination of rates for borrowed workers as well as a more careful follow-up of their
production. These recommendations have not yet been made effective, although



the recommended changes are being carefully drawn up "on paper" to show
the particular places where heavy expenditures are taking place.
As has been pointed out, no provision is made for increasing the fund and it is
therefore of the greatest importance to conserve the present amount available
for unemployment benefits.
2. Definition of unemployment.—Unemployment in the Dennlson plant means
not only complete lack of work but also any loss incurred by a worker by reason
of his being transferred to another job in his own or another department.
A person is not considered unemployed unless he is laid off for lack of work
for one-half day or more. No compensation is paid "for any shut-down ordered or requested by the civil or military authorities or for any absences
resulting from a vote, decision, or action by or disability of the employees
themselves, individually or collectively." Likewise, " No compensation need be
paid for time lost on account of destruction of any portion of the company's
property by fire. In the case of unemployment resulting from lightning,
earthquake, windstorm, or other act of nature, payments may be suspended or
reduced by a majority vote of the unemployment fund committee." The fund
is not available for persons who leave voluntarily or are discharged for
cause, nor for workers who are hired for temporary work.
When during a period of slack wTork the majority of workers in a department
are desirous of a vacation even without pay, the entire department is laid off
without paying unemployment benefits to the minority who may prefer not to
take a vacation. This happens in the box division which closes down for
vacation two weeks every summer. Inasmuch as the lay-off or vacation is
the desire of the majority of the workers in this division, those who do. not
wish a vacation are not paid unemployment benefits. Usually, however, it is
possible to give those people temporary employment in other divisions of the
When workers have to be permanently laid off because the volume of work of
a certain class is permanently reduced on account of changes in method, product, or market demand, and employees can not be or are unwilling to be
transferred elsewhere, they are given two weeks' notice or two weeks' pay,
one week being charged against the operating expenses of the company, and
one week against the unemployment fund. When workers are discharged for
inefiiciency they are given one week's notice or one week's pay. In the case
of proved inefficiency nothing is charged against the unemployment fund,
but where the case is doubtful the second week's pay may be charged against
the unemployment fund. No notice or discharge bonus is required in case of
temporary workers, although they are usually notified several days before
they are laid off.
3. Eligibility for benefit.—At present all employees, including salaried workers except executives, are eligible. Until 1927 salaried workers were not
covered by the provisions of the unemployment fund. Another recent change
was from no requirement in the matter of length of service before an employee
was eligible for benefit, to a requirement of six months' continuous service.
This ruling was passed by the general works committee in February, 1926. In
connection with this ruling the unemployment fund committee recommended
and the general works committee accepted the following:
" In the case of such employees (people of less than six months' continuous
service) lay-offs for lack of work may be made