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Work Materials No. 17 falls into the following parts: 

Part A 
Part B 
Part C 
Part D 
Part E 
Part F 


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fit. \T 


Industry Studies 
Labor Studies 
Trade Practice Studies 
Administrative Studies 
Legal Studies 
Contributory Materials 

) > > j 

December, 1935 


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• • •„- • •: 

. • • • • • • 

• •• 

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19 3 5 


In order that those working on one study may secure access to 
allied materials in other studies, these TENTATIVE OUTLINES AND SUM- 
MARIES are made available for confidential use within the Division 
of Review* ' ' 

Since these documents were prepared' from work that is now in 
process, they are highly tentative. The outlines are the present 
operative tables of contents of the studies, "out they are of - course 
subject to change as the work progresses. The summaries are, in 
some cases, forecasts rather than actual summaries of developed manu- 
scripts. Notwithstanding their tentative character, the documents 
will serve to indicate. in some detail the subject matter of the studies 
now in process in the division. No one will think of these materials 
as "findings" or "reports" in the usual sense of those terms. 

will result in many conferences, both formal and informal, among 
those working on the studies — to the ends that effective coordina- 
tion of the studies may occur and duplication of effort will be 
reduced to a minimum. 

L. C. Marshall 
Director, Division of Review 

1 3 My 36 g 

9347 -i- 


Administrative Studies 

N.R.A. organization William W. Bardsley, Coordinator 

Code Acimini strati on, Harry Weiss, Coordinator 

Foreign Trade Studies Section H. D. G-resham, Coordinator 

Industry Studies Section M. D. Vincent, Coordinator 

Labor Studies Section A. Howard Myers, Coordinator 

Legal Studies Section Angus Roy Shannon, Coordinator 

Enforcement Studies R. S. Denvir, Coordinator 

Research Studies G-. W. Kretzinger, Jr., Coordinator 

Special Studies Section. G-. C. Gamble, Coordinator 

Statistics Study Section W. J. Maguire, Coordinator 

Trade practice Studies Section Co rwin Edwards, Coordinator 

December, 1935. 





AUTOMOBILE INDUSTRY ~ (George Ifcrricki Jr) 

Summary ......... 

Table of Contents ''.".*•'. . . . . . . '. 1 


Summary . . 18 

Table of Contents ...... 11 

CONSTRUCTION INDUSTRY ~ (P. A. Stone .& R. D. Winstead) 

Summary ................. 30 

Table of Contents 21 


Summary ■ . . . . . 40 

Ta'ole of Contents . • 35 


Summary ................. • 50 

Taole of Contents J ............ . 46 

FISHERY INDUSTRY. ~. (John R. Arnold) 

Summary . . 63 

Ta"ble of Contents '. . . ' 57 

HEALWEAR INDUSTRY - (James C. Uorthy, Jr. ) ' ■ 

Summary . . 75 

Tatle of Contents ...... 6 ? 


Summary . . . . ♦ 86 

Table of Contents 82 


Summary . 94 

Table of Contents ' 88 


Summary . . . ' 113 

Table of Contents .' .' 99 


Summary 121 

Table of Contents . . . . 117 

MEN ! S CLOTHING INDUSTRY ~ (J. W. Hathcock) ■ 

Summary . ' 134 

Table of "Contents .'. 127 

PAPER INDUSTRY - (E. R." Jones & R. A. Neary) 

Summary . . .'. 148 

• Table of Contents .......... 138 

RUBBER INDUSTRY ~ (g. S. Earseman) . . 

Summary ............ '. 154 

Table of Contents . -. 151 

TEXTILE INDUSTRY - (W. H. Dillingham 

Summary 164 

Table of Contents 158 

GERMANY, ITALY AND JAPAN- (Ivan V. Emelianoff). 

Summary .......... 173 

Table of Contents 170 

TOBACCO INDUSTRY - (H. H. Titsworth) 

Summary '. 179 

Table of Contents 176 



WHOLESALE TRADES - (R. A. Dier & H. E. A"bt) Page 

Summary . 193 

Table of Contents 187 


CONTRACT SYSTELI - (S. Trowbridge) ' ' ' 

Summary • 208 

Table of Contents 202 



Summary .....' 214 

Table of Contents 210 


AND SUIT INDUSTRY ~ (S. ftrowVridge) ' 

S"ummary 218 

Table of Contents ....... 216 

FINANCIAL PROBLEMS ~ (A. A. Fisher) ■ • ; * 

Summary . . 199 

Table. of Contents 197 

# * ■ * # # 


(Foreign Trade Studies Section Staff) 

Summary 221 

Table of Contents 220 


Summary 227 

Table of Contents ...'..' 225 


INDUSTRIES: ' ■•■,.. 

FOREST PRODUCTS - (A. Bevan) * ' 

Summary 234 

Table of Contents ....'.' 232 

COTTON TEXTILES ~ (Norris Kenny) 

Summary • 242 

Ta"ble of Contents ' 240 

AUT0I.I0TIVES - (L. G. Neman) 

Summary ■ 247 

Table of Contents ...... 246 


Summary 252 

Table of Contents .......'..'... ; 250 


UNDER THE ACT** - (E. E. Gerry) 

Summary ....... ............. 259 

Table of Contents 257 

* See also The Administrative Section ~ W. W. Bardsley, Coordinator 
** See also Legal Studies Section - Angus Roy Shannon, Coordinator 




Table of Contents 


I, Study includes the Manufacture and Distribution of Automobiles and 
Parts Formally Subject to the following Codes of Pair Competition 

A. Automobile Manufacturing Industry 

B. Automobile Parts & Equipment Manufacturing Industry 

C. Special Tool, Die & Machine Shop Mfg. Industry 

D. Wholesale Automotive Trade 

E. Motor Vehicle Retailing Trade 

II. The Economic Significance of Automobile Industry and Effect upon 
Economic Process in the United States 

A. Three decades old in 1929 - in development stage at least until 

B. Set in Motion Economic Demands Which Required the Employment 
of More than 5,000,000 Workers 

C. Was Financed out of Profits with Minor Exceptions 

D. Comparison of History of Profits with Utility Industry, etc. 

III. Type.s of Concerns Involved in Automobile Manufacturing and Trade 
with Reference to - 

A. Labor Requirements 

B. Character of Technological Processes 

IV. Products Manufactured and Sold (Partial Enumeration of Typical Ex- 

V. Organization of Natural and Economic Resources 

A. Capital 

B. Labor 

C. Management 

D. Technical Knowledge 

VI. Managerial Policies Regarding (General Statements) 

A. Labor 

B. Ownership 

C. Distribution 

D. Related subjects 

VII. Reasons For and the Results of Competition Throughout its History 

A. Importance of Style in Stimulating Demand 

B. Utilitarian Demands and Improvements 

C. Effect of Certain Large Units Dominated by Men Who are Competi- 
tively Minded (Ford) 

D. Effect on Profits of Ran id Changes 
S. Effect on Prices to Consumers 

F. Effect on Wages 

C-. Effect on Parts Suppliers 
H. Effect on Dealers 



VIII. Outlets for the Manufactured Product in 
A. Domestic Trade 
B« Foreign Trade 

IX. Comparison of Distribution Plow from Manufacturer to Consumer with 
Other Key Industries and with Regard to 
A« Interstate Commerce 
B« Credit Policy and Terms of Credit and Sale 

C. Control Over Pricing and Price Control Exercised by the Manu- 

D. Centralization of Manufacturing Plants 

X. Pre-Code Problems Leading up to the Drafting of the Codes of Pair 

A. Effect of the Depression of 1929-1933 Upon 

1. Sales and Production 

2. Productive and Trading Capacities 

3. Prices 

4. Man-hours 

5. T .7age Rates 

6. Labor Relations 

7. Payrolls 

8. General Employment 

B. Trade Practices in the Industry with Reference to 

1. Coercion 

2. Destructive Price Cutting 

3. Discrimination 

4. Channels of Distribution 

5. Other Practices 



I. A Statement of the Ten Policy Objectives of the Act 

II. Elaboration of the Objectives as Contained in Later Developed Ad- 
ministration Policy 



I. Attitude of the Industry Toward Codification 

II. Attitude Toward Competition as Indicated by Code Provisions Sub- 
mitted or Approved 

A. Manufacturers - No Interference; Therefore No Trade Practices 

B. Parts Manufacturers - Protection Among Themselves 

C. Dealers - Protection Among Themselves 

D . Labo r 

III. Sponsoring Organizations (Percent Representation - Units - Employees, 
etc. ) 

IV. Process of Code making (Brief Summary of High Lights of Hearings, 
etc. ) 



V. Definition, and Scope of Coverage 

VI. Code Provisions (Summary of Pertinent Provisions) 

A. To Correct Those Operating Characteristics That Appeared to Need 
Correction in Their Economic and Official Maladjustments 
1. By establishing a Limit Beyond Yfhich .Disturbing Factors 

¥ould Not Be Permitted to Effect Certain Interests or Groups 
. '2. By Introducing a Cooperative Technique for the Solution of 
Common Problems 

VII. Administrative Agencies 

VIII. Administration (Agencies and Government) 
A. Deputies and NBA Administration 
. B. Code Authority and Agencies ' 

1. Pacts and Opinions Relating to Capabilities of Individuals 
and Collective Groups 

2. Authorized or Unauthorized Exercise of Their Authority 

3. Educational Activities 

4. Attitude Toward 

(a) Administrators 

(b) Code Authority 

(c) Industry Members 

5. Evidence of the Effect of Changes in Personnel. 
C. Trade practices and Labor Provisions 

lo Compliance Situation (Stating Exceptions) 
2. Activities and Opinions with Reference to the Administra- 
tion of these Provisions by 

(a) Administration 

(b) Code Authority 

(c) Industry Members 

(d) Employees 

(e) Customers 

I. History 
II. Comparison with Other Key Industries 
III. Operation Under the Codes 

IV. Issues 

A. Covered by Code Provisions 

B. Not Touched on by Code Provisions - Technological Advances and 

C. Arising from Codal Provisions 
1. Irregularity of Employment 


I. History 

II. Comparison with Other Key Industries 


III. Operation Under the Codes 

A. Facilitation of Effective Competition as Measured Through the 
Attainment of Open Price Provisions 

B. Regulation of Indirect Pricing 
(l) Price Maintenance 

(3) Used Car Allowances 
(3) Uniform Credit Terms 

IV. Issues 

A. Covered Through Codal Provisions 

B. Hot Covered Through Codal Provisions 
C» Arising Prom Codal Provisions 


I. Pre-Codal Problems from the Viewpoint, and Reactions, of the 
following: (Labor and Trade Practices Detailed in IV and V) 
A. Members of the Administration 
3. Members of the Code Authority 

C. Members of the Industry Both Large and Small 

D. Employees 

E. Customers 

II. Attainment of Objectives. (Labor and Trade Practices Detailed in 
IV and V) 

A. The Extent Industry Problems Were Answered Through Codal Pro- 
visions in the Drafting of the Codes 
3. Did the Codes Pall Short of These Objectives Through 

1. Insufficient Insight or Partisan Interests 

2. Adequacy or Inadequacy of Treatment 

C. Principal Problems Left Uncovered in the Codes and the Reasons 
for such Omission 

D. New Problems Resulting from the Codes or from Their Adminis- 

E. Voluntary Agreement of the Motor Vehicle Retailing Trade and 
its Disposition 


I. Subjects Designated as "XX" Subjects in the December 1, 1935, Re- 
port of this Study Unit 

II. Controversial Subjects Requiring Further Study and Closer Coor- 

III. The Following Fundamental and Suggestive Subjects Which, from the 
Very Nature of their Problem, Involve Theoretical Treatment That 
Recuires Substantiation, Either Through Practical Trial and Error, 
or Through the Procurement of Factual Evidence Which is Not Now 
in Possession of this Study Unit: 



A. The Fundamental Problem: Unemployment of Labor 
1. Its Real Cause 
2» Its Basic Corrective 

3. The Relationship of this Corrective to the Code Problems 

(a) Minimam Wages 

(b) Maximum Hours 

(c) Pair Trade Practices 

B # Consideration as to Whether the Automobile Manufacturing Indus- 
try is a High Profit Industry, as popularly assumed 
1, If a High Profit . Industry 5 Whether its Obligations to 

Labor and to the Consumer Have Been Fulfilled 
2« If not a High Profit Industry, fi/hether its Obligations are 
C # Investigation into 

1. Surplus ■•;; 

2# Undivided Profits 

3. Reserves in Relation to Obligations 

4. Sources of Obtainable "Working Capital" 

(a) The Above Investigation should Endeavor to Formulate 
Industry' s Obligations to its Unemployed 
D* Investigation into 
lo Sales Volume .. 
2« Sales Prices 
3 #. Income and P r o f i tr t o. ,' evs t ab 1 i sh 

(a) The Need of a Scientific Pricing Policy to Yield 
(la) Lower Real Prices 
(2a) Greater Real Values 
(3a) Greater Volume 
(4a) Greater Profit 
(5a) Increased Employment 

E. Peculiarities of the Automobile Manufacturing Industry in 
Opposition to the General Industrial Method in 

1« Financing of Fixed Capital 

(a) Out of Earnings 

(b) By Incurring Fixed Indebtedness 

(la) In an Effort to Determine the Basic Dynamic 
Character of the Industry as Opposed to 
Popular Static Economic Thought and Con- 

F. Investigation of Costs and Return 
1 • Wage s 

2» Managerial Expense 
3« Return on Capital 

4* Their Relationship to Revenue Available for Distribution 
(a) To Determine Whether Labor is Receiving Consistent 

G. Technological Advance 

1» Its Relative Impetus During Periods of Slack Demand 

2, Its Necessary Function in Bringing About Increased 

H. The Trend of Capital Investment 

1* Its Effect in Providing During Depression Periods, for 
the New, and Higher, Industrial Peaks 



I. Investigation of the Method proposed in Leveling Production 

1. The Price of New Cars, Through Monthly Pricing Variations, 
or Discount Changes, to Care for the Fluctuation in Con- 
sumer Values Resulting Prom Style Obsolescence 

J. Technological Advance and its Relative Effect on the Dis- 
placement of Labor 

K. Hours of Work and a Scientific Method of Appraising Effort 
and Cost in Terms of Fatigue 

L. Wages and Their Relation to Piece or Bonus Methods of Remuner- 

1.1. Speed-up, Patigae, end the Condition of the Labor Markets 

N. Distribution Methods and a Discussion of Such Proposed 
Methods as 

1. Centralized Selling Depots 

2. Adjusted Discounts to Care for Relative Dealer Costs of 
Operation in Order to Provide a Possible Uniform Return 

0. Foreign Trade Outlets 

1« Effect of Import and Foreign Tariffs • 

2. Embargoes 

3* Quotas 
P. Miscellaneous Topics 


Io Tabulations Covering Several rages (Summarized in the Body of the 

II. Enumeration of Voluminous Detail 
III, Exhibits 


Preliminary Summ a ry of Findings 

This economic summary of the Automotive Industry comprises the 
manufacture and distribution of automobiles and parts therefor to the 
consuming public. The Industry is comparatively young being only three 
decades old in 1929 and can be considered to have been in the develop- 
ment stage at least until 1926, It has furnished direct and indirect 
employment for more than five million workers. It is one of the 
largest, if not the largest, manufacturing industry, employing direct- 
ly in 1934 approximately 450,000 men annually in the manufacturing 
processes and 350,000 in the distribution processes* 

One of the unique features of the financial History of the automo- 
bile manufacturers is that they financed themselves almost entirely out 
of profits. Certain periods in their growth are accompanied by the 
ratio of net income to average capital of some manufacturers running 
in oxcess of 50 per cent. During" the past ten years net income for 
these manufacturers has averaged approximately 30 per cent of their 
average capital stock. Their Financial -History contrasts with that of 
the Public Utility Industry which has developed and expanded largely 
through the form of fixed indebtedness incurred through bond issues and 
the like. 

The technological advance, or in other words, the improvement in 
mechanical processes of mass production, has enabled this Industry to 
so reduce the cost of its finished product that in the short space of 
time between 1908 and 1912, one manufacturer was able to reduce the 
price of his product from $950 to $550 and yet maintain his profit po- 
sition by the material increase in the demand resulting from the reduc- 
tion in price. 

The competitive factors have been constantly present in this Indus- 
try since its inception. At the present time three manufacturers domi- 
nate the Industry, namely, Ford Motor Company, General Motors Corpora- 
tion, and the Chrysler Corporation. These manufacturers at present 
account for more than 90 per cent of the total production in the Indus- 
try, the balance being divided among eleven other manufacturers, known 
as the "Independents", chief among which are Packard Motor Car Company, 
Studebaker Corporation, and Hudson Motor Car Company, 

The importance of style change and the addition of the utility as- 
pect to the luxury and pleasure aspects, have increased demand and to- 
gether with price reductions have so broadened the market that in 1929, 
4,794,898 units were produced by 427,459 employees. The effect of the 
depression was 'to reduce these figures to 1,627,361 units and 190,027 
employees in 1933, The competitive struggle during the depression years 
did not, however, cause a material downward adjustment by the factories 
in the price of their automobiles. It was contended, however, that 
groater value was being built into the merchandise by various mechanical 
and decorative improvements. Labor was becoming restless as the work- 
ers out of employment increased. This restlessness tended to bring to 



the surface certain grievances, either substantiated or unsubstantiated, 
held against the manufacturers. Chief among these were the contentions 
that "speed-up and espionage" were making conditions intolerable for 
those fortunate enough to be employedo 

In the formation of the Codes of Fair Competition, the automobile 
manufacturers desired no interference or regulation in their productive 
processes. However , they submitted and accepted a Code with very flex- 
ible labor provisions and no trade practice provisions. The automobile 
parts and equipment manufacturers, due to their close manufacturing as- 
sociation with the automobile manufacturers, adopted similar labor pro- 
visions in their Code. However, due to the greater integration of this 
group and the multiplicity of units they desired to establish certain 
trade practices in order to govern competition among themselves. 

One effect of the Code in the Automobile Manufacturing Industry was 
to make the Industry conscious of the necessity of improving its labor 
relations and working conditions. It can be said that even though the 
labor provisions in this Code were very flexible they did tend to in- 
crease the irregularity of employment during the year. The question 
can be raised, however: Is not this irregularity of employment and the 
spreading of work desirable as contrasted with a group receiving no em- 
ployment at all throughout the year? Before a definite answer can be 
given a close study and consideration of the other fields of employment 
such as agrarian employment should be made and its tendency to balance 
out the irregularity of industrial employment in certain areas. 

For the past ten years automobile production during the annual 
period has assumed approximately the same curve, reaching its maximum 
during the late spring months of April and May, and its minimum some 
time late in October or the first part of November. Ify Executive Order 
of the President, based on studies that were conducted with reference 
to a possible leveling of production, it was recommended that the new 
model urge be superimposed on the normal "low" area in the early winter 
months by the introduction of new models in the late fall of the year. 
It was felt that this would help to regularize employment and prevent 
superimposing a new model urge on top of a normal seasonal urge as has 
been the case for the past ten years when the shows were announced in 
January* At the present writing, the partial success of the Fall Show 
has been shown by the stimulation of the demand for automobiles in a 
normal slack season. But a carryover from the Fall Show Period of a 
large used car inventory resulting from this new model impetus may 
strain the financial reserves of the dealer during the cold winter 
months when demand for this type of car is at its lowest ebb. What the 
net effect of the Fall Show will be is as yet conjectural. 

In the distribution end of this Industry the Motor Vehicle Eetail 
Trade dealers suffered from competition among themselves caused by com- 
petitive bidding on the used car which as a rule is taken in trade and 
accepted in lieu of money as part payment on a new car. Dealers operat- 
ing with an overhead incurred during the flush years were forced to' 
meet expenses on less than 1/3 of the former total volume of sales and 
in certain instances were faced with, especially in urban areas 9 an in- 
crease in the number of competitors handling similar makes of cars. The 



"used car problem' 1 and the ".factory-dealer relationship" were the two 
major accentuated "by the depression. 

The Motor Vehicle Retail Trade dealers eagerly advocated a Code 
which would regulate competition with reference to the used car and its 
use in lieu of money. The other trade practice provisions contained in 
this Code largely tended to strengthen and prevent evasion of the used 
car allowance provision, and in addition covered ""bootlegging" of new 
cars and false speedometer adjustments. 

During the Code period, on the "basis of certain spot checks taken, 
Dealers showed a reduction in their used car losses which was attribu- 
ted to the used car allowance provisions contained in the Code. It is 
contended, however 9 that this improvement in the used car situation was 
virtually off-set "by the action of the manufacturers in eliminating 
certain accessory and delivery profits which they had previously enjoyed. 
This they claimed amounted to a net reduction in the gross profit margin. 
The Dealers also contended that {the manufacturers in their struggle to 
maintain volume especially during the depression, expanded their policy 
of establishing competitive Dealers in the same territory which tended 
to reduce each individual Dealers sales potential to such an extent that 
it was no longer possible for him to make a fair profito This is com- 
monly known as the "multiplicity of dealerships" and was not covered "by 
any provisions, either in the Manufacturers Code or the Dealers Code. 

Generally speaking, it is felt that the maximum used car allowance 
provision of the Motor Vehicle Retail Dealers Code provided a more ac- 
curate measure of the market value of the used automobile than was ob- 
tained before the Code period. It can be argued^ however, that fixing 
a maximum allowance price even though it is above the average price, 
works a hardship on those consumers and on certain dealers from whom 
they buy, where the dealers operating efficiency is considerably above 
the average, or whose physical and geographical set-up enables them to 
operate at greatly reduced overhead cost of sales as contrasted with 
certain other competing dealers. Indeed, within the same geographical 
sales area, there has been shown to be a wide divergence in the market 
for used cars. A case in point is Washington and Philadelphia, both in 
the same area of regulation for maximum values, which had during 1934 a 
market differential cf some 25 per cent in the value of its used 

In their desire to continue regulation of competitive practices 
within the trade, the National Automobile Dealers Association submitted 
to the Federal Trade Commission a voluntary trade practice agreement 
subsequent to the Supreme Court Decision invalidating the original NRA 
Act. Up to the present writing, this voluntary agreement has not been 

It is felt that the following areas for further study, if carried 
out to completion, should yield the answers to certain controversial 
problems still pro son t in this Industry and Trade: 

(l) Has the development of the Automobile Industry progressed be- 
yond its sales policy and method of distribution? In other words, 



has the automobile "been accepted "by the consuming public to such 
an extent, that it can no longer "be considered a "specialty" product 
and therefore no longer lends itself to specialty selling methods, 
(The essential characteristics of its distribution methods has re- 
mained static for the past twenty years.) 

(2) If the present method of distribution no longer serves the 
purpose of delivering the product most effectively and at the least 
cost to the consumer, would a centralized selling depot "be more 
effective and efficient? 

(3) If the present distribution system is found to be correct, 
then what adjustments should be made in order to overcome "the used 
car problem", "factory-dealer relations", "multiplicity of dealer 
relationships", "seasonal adjustment of selling prices", etc. 

(4) Is the Automobile Manufacturing Industry a high profit industry 
as is popularly assumed? How are these prof its .distributed among 
executives, stockholders and personnel? What has been the effect of 
the great strides made in "technological advancement", its relative 
impetus during the periods of slack demand, and its necessary 
function in bringing about increased productivity? 

(5) What is the effect of the present foreign trade. policy on 

the prorated 71,000 employed (1929) and the $579,000,000 of export- 
able production (1929) within this Industry? 

(6) Why can not a decrease in "real" prices, contrary to establish- 
ed popular opinion, result in an accelerated increase in net sales 
and - what is most important - in an accelerated increase in net 
profits available for dividends; thus permitting the formulation of 
an economic philosophy based on the simultaneous procurement of ~ 

(a) Lower "real" prices and greater "real" value 
to the consumer 

(b) Increased demand, increased employment and 
increased compensation for labor. 

(c) Greater profits for the investor. 

(d) An increase in public wealth and a corresponding 
stabilized prosperity. 

Can not a scientific method of price determination be established 
that will permit the planned economy of free competition? 

It cdai be said, without fear of contradiction, that a study which 
considers this Industry as a unit in its manufacturing and distributing 
processes can eliminate factional group bias and through a more complete 
understanding of the motivating causes, many of the so-called "issues" 
or "friction points" can be overcome, to the betterment of the Industry, 
its associates and its consumers. 



Table Of Contents 
. I. History of Problems 
II. The industry's Position in 1933 

III. NRA Code for the Bituminous Coal Industry 

A. Its Major . Provisions and Their Bearing on the Outstanding 

B. Administrative personnel and Functions 

IV. Results of Code Operation 

A. Upon Labor 

1. Wage Scales Established on Reasonable Basis 

(a) Relationships and Differentials 

(b) Negotiations by National Scale Committees 

(c) Changes in Wage Scales under the Code 

2. Maximum Working Hours 

(a) The 8- Hour Day Re-established by the Code 

(b) Amendment 1 Inaugurating 7-Hour Day and 35- Hour Week 
for the First Time in any National Industry 

3. Earnings Under the Code 

(a) During the 8-Hour day period 

(b) During the 7-Hour day period 

B. Upon Production and Total Costs 

1. Cost Elements and their Proportionate Importance 

2. Range and Averages of Costs 

(a) Division I, Producing 72|$ of the U. S. Total 

(b) Division II, producing 16-gfo of the U. S. Total 

(c) Division III, Producing 3? of the U. S. Total 

(d) Division IV, Producing 2^ of the U. S. Total 

(e) Division V, Producing 5^5 of the U. S. Total 

3. Cost Increases due to the Code 

(a) Divisions I, II, III 

(b) Increase due to 7-Hour Day Partially Offset by Im- 
proved Mechanization and Management 

C. Upon Prices and Realization 
1. Belov7-cost Prices in 1933 

(a) Average Realization first 9 months 

(b) Average Realization Increased Materially under Code in 
Last Quarter 

(c) Average Realization follows Labor Cost Increase April 
1, 1934; Average for 10-months April 1934 - Jan. 1935. 

D. Upon Margins between Cost and Realization 

V. Overall Economic Results of Code Operation 

A. Compliance Good in Early Months, Weakening as to Prices and 
Finally Collapsing in Spring of 1935 

B. Strengthening of the Industry's Morale and Financial Position 

C. Demand for 2- Year Extension of Code 



D. Introduction of Special Legislation (Gui fey Bill) , its History 
and Passage 

E. Pur-noses and Provisions of Bituminous Coal Conservation Act of 


I. Definition of the Industry; Its Importance; Its Place in Industry 

II. Geographical and physical Description of the Industry 

III. Intensive Competition in past Decade 

A. Cross Flow of Coal from Producing Fields to Markets 
3. Shifting Impoi tance of Fields and Markets; Their Causes and 

1. Variations in Sizing and Grading to Meet Market Demands 

2. Competition "between Non-Union and Union Fields 
5. Freight Rates as a Factor 

C. Competition with Other Fuels 

D. Fuel Economy Contributes Its Share 

E. Mechanization of Mines One Result of Competitive Pressure, as 
a Factor in Cost Reduction 

F. Market Conditions at Introduction of Code 

IV. History of Production 

A. Seasonal and Cyclical Fluctuations 

B. Close Relation of Production and Transportation Service 

C. Storage Facilities and Habits 

V. Over- Capacity to Produce 

VI« History of Prices, Profits and Losses, Distribution and Distribu- 
tion Agencies 

VII, Previous Governmental Activities Affecting Bituminous Coal 

VIII. The Industry* s Labor, Prices, and Markets in Desperate State at time 
of Code Introduction 


I. Introduction of 21 Sectional Codes 

A. Conflicting Provisions Illustrative of Industry's plight 

B. Emergence of National Code through Conciliation, Concession, 
and Compromise 

II. The Purposes and Main Provisions of the Industry Code 

A. Labor Provisions 

!• Maximum 40-Hour Week 
2. Basic Wage Scale 

B, Trade Practice Provisions 

1» Marketing and Price Fixing 
'2, Other Trade Practices 



C. Administrative Provisions 
1. Code Authorities 

2* Financing by Budgets 

3. Other Administrative Provisions 

D. Amendments to Code 

1. Amendments 1, 2, and 3: Revising Basic Wage Scale and Es- 
tablishing 7-Hour Day 

2. Amendment 4: providing for a Statistical Bureau in each 
Code Authority 

3. Amendments 5 and 6: Amending and Revising Price and 
Marketing provisions 

4. Amendments 7 and 8: Providing Representation for Labor on 
Code Authorities, and Making Code Co-terminal with NIRA 

5. Amendment 8 


I. The Industry 1 s Makeup 

A. Operating Units and Companies; Interrelations 

B. Fluctuations in Number of Operating Units, 1920-1934, and 
Causes Thereof 

C. Captive Mines; Number, Importance, and Relationships 

II. Administrative Organization of NRA for this Code 

A. The Administrator and Deputies 

B. Statistical Reporting, Pact Finding, Research 

C. Advisory Boards 

D. Compliance Machinery 

E. Legal 

F. Labor and Industrial Boards 

III. The Industry 1 s Organization 

A. Geographical Districting 

B. Code Authorities 

C. Marketing Committees 

D. Arbitration Boards 

E. Special Conferences 

F. Financial Support 

IV. Labor* s Participation in Administrative Machinery 


I. Production 

A, Production and Mining Capacity 

3. Production and Industrial Activity 

C. Production by Areas, States, Fields 

D, Production by Code Divisions and Subdivisions 

II. Distribution of Bituminous Coal 

A. Movement in 1929 

B. Interstate Character of Shipments, 1929 
C« Tidewater Movement 

D. Lake Cargo Movement 

E. Shipments Westbound 


III. Stocks in Consumers Hands, 1918-1934 

A. Statistics of Stocking 

B. Limited Available Storage Facilities and Reasons Therefor 


I. Adequacy of Transportation 

A. Problem of Car Shortages • 

1. Nature of Car Shortages . • 

2. Factors Contributing to Car Shortages 

3. Measures to Relieve Car Supply Pro Mem ■ 

B. Practices in Handling Coal Cars , . 

C. Effects of Car Shortages and Preferential Handling of Coal cars 

II. Improvement in Transportation Facilities and Practices 

III. Freight Charges - Their Importance to Bituminous Coal 


I. Labor Costs a Heavy Factor in Costs and Prices 

II. Pre-NRA History of Rates and Hours; Employment and Earnings 

III. Code History of Wages and Hours 

IV. Employment and Earnings Under the Code 

V. Labor* s Gain Under the Code 

A. Monetary Gains 

B. Non-monetary Gains 



I. Differentials in Basic and Contract Wage Scales, 1920 - 1933 

II. Narrowing of Differentials North - South Under the Code, October, 

III. Attempt to Equalize Northern and Western Fields, All Southern and 
Southwestern Fields, and to Narrow Still Further All Differentials 

IV. Acceptance of Amendment, April 1, 1934, by All Subdivisions Except 
Alabama, Western Kentucky and the Southwest 

A. The Purpose and Provisions of Amendment 1 

B. Adjustment Effected, After Protest by Alabama - Tennessee «- 
V Georgia, through Amendment 2 

C. Adjustment Effected, After Protest by Southwestern Subdivision, 
through Amendment 3. 

D. Western Kentucky Injunction Against Enforcement of Amendment 1 


V. Resume* of Sectional Feeling and Situation re Differentials at Ex- 
piration of Code on May 27, 1935. 

VI. Discussion of Other Differentials 


I. Code Wages and the 8-Hour Day as Reflected in Labor Costs, or Wage 


A. Wage Bill Before the Code, "by Divisions and Subdivisions 

B. Wage Bill under the Code, "by Divisions and Subdivisions 

C. Effect of Amendments 1, 2, 3 and the 7-Hour Day on Wage Bill 
per Ton. 

1. Effect on Productivity per Man- Day 

2. Stimulus to Owners and Management 

(a) Mechanization 

(b) Improvement in Management and Under-ground organiza- 

3. Increased costs due to Reduced Hours and Higher Wages 

II. Effect of 7-Hour Day and Mine Output per Day 

III. Overall Increase in Wage Bill, Changes in Days and Hours Worked 
and Productivity Due to Code and its Amendments. 


I. Significance of Cost Data in any Consideration of the Industry's 
Economic History 

II. Forms Used in Reporting to N.R.A. 

A. Description of Reporting Forms 

B. System used in Receiving, Editing, Tabulating and Summarizing 
Cost Data 

III. The Published Summaries, Projections and Frequency Dispersions - 
their significance; uses; representativeness 

IV. Factors Affecting Costs 

V. Costs Prior to N.R.A. 

A. During War Days: 1918 - 19 
3. Post-War: 1920 - 1921 

C. At Height of General Prosperity, 1929 

VI. Costs During N.R.A. Code Period, Nov. 1933 - Jan. 1935 

A. Monthly Variations and Causes 

B. During 8-Hour Day Period, to Mar. 31, 1934. 

C. During 7-Hour Day Period beginning April 1, 1934 

VII. Composite Results of the Code as Reflected in Costs 
■flu' By Divisions and Subdivisions 

B« For Divisions I and II Combined, fpr Comparisons with 
Minimum Price Area 1 under Guffey Coal Act. 



I. Code Provisions for Marketing and price-fixing 

II.- Methods and Procedure Followed in Setting up Prices 
A. Factors Considered; Classifications, etc. 
3. Development of Marketing Areas 
C. Correlation "between Fields 

III. Compliance, Its Early Strength, Gradual Weakening, Eventual Break- 

A. The Industry' s Part 

B. Weakness of Compliance Enforcement Efforts 

C. Chronological History of Price Compliance 

IV. Interdependence of Price Maintenance and Integrity of Wage-Scale 


I. The History of Average Value of Realization from Sales, 1917 - 1933 

II. Realization from Sales During Code Period . . 

A. Reporting Forms Used and Method of Editing, Tabulating and 

Summarizing Employed. 
3. Weight of Pre-Code Contract Shipments on Average Realization 

C. Realization from Sales, "by Divisions and Subdivisions, November 
1953 - January 1935. 

1. Direct Effect of Labor Costs on Prices and Realization; 

2. Month by Month Trends 

D. Realization from Sales, Divisions I and II Combined, for Com- 
parison with Minimum Price Area 1 under Guffey Coal Act. 


I. Administrative Weaknesses 

A. Indefinite and Inadequate Bases Prescribed for Price-Fixing 

B. Vacillating and Indefinite Policy with Respect to Factual Re- 

C. Compliance Efforts Indifferent 

II. Comparative Stability Nevertheless Attained after Decade, of In-, 
stability and Chaos 

III. Final Weeks of the Code 

A. Price Debacle Threat to Wage Scale 

3. Special Legislation Proposed - Guffey Bill 

C. Wage Conference Negotiations Failed Repeatedly; Strikes Called 
and Postponed 

D. Code Terminated by Supreme Court Decision 


• -17- 

IV. GrVufey Bill Becomes an Issue; its' Final Passage; Its Purposes and 
Main Provisions 

V, Reaction of the Industry, of Consumers, of Labor to the Bituminous 
Coal Conservation Act of 1935 (Guffey Coal Act) 

A. Test cases on Constitutionality Multiply 

B. Lower Court Decisions, Indications 

C. Divided Support from Coal Industry; Other Industries (consumers); 
General Public 




Preliminary Summary of Findings 

Unlike most industries, the bituminous coal industry experienced 
economic distress and liquidation for several years prior to the general 
depression, which "began with the stock market collapse late in 19£>9 # 
Mine prices of coal had fallen year after year since 1923, wages qf work- 
ers were progressively lowered, and the financial condition of operating 
companies was being seriously impaired. The depression period prior to 
the Code merely intensified the process of economic decline and liquida- 
tion of the industry which began in 1924. The chief cause of this dis- 
tress is to be found in the fact of excess productive capacity as com- 
pared with consumer demand. 

Excess Productive Capacity 

The entire statistical record of the bituminous coal industry (dat- 
ing from 1882) indicates productive capacity in excess of production. 
However, up to 1918, the industry enjoyed a remarkable and fairly uniform 
growth. The average annual increase from 1899 to 1918 was approximately 
18,000,000 tons. This increasing production, while accompanied by in- 
creasing capacity, nevertheless mitigated somewhat the pressure of over- 
capacity; and until 1917, the level of mine realization for coal varied 
only moderately from year to year. Beginning in 1917 and continuing 
through 1923, the average realization was more than double the level that 
had prevailed over a decade prior to the war. As shown by Treasury state- 
ments, the industry reaped enormous profits from 1917 to 1920, reaching 
nearly a quarter of a billion dollars in the latter year. 

These conditions resulted in a great increase in the number of mines, 
the attachment of great numbers of workers to the industry and enormous 
expansion of capacity. This growth continued through 1923, when caiDacity 
reached an all-time peak of 970,000,000 tons, on the basis of a 308-day 
year. Since the highest production ever recorded was only 579,000,000 
tons (during the war), so great an excess over marketable demand rendered 
inevitable the liquidation and deflation process which followed and con- 
tinued up to the summer of 1933. 

Period of Deflation, 1924 - 1933 

The full force of excess productive capacity began to make itself 
felt in 1924, By that time the problem of car shortages that existed in 
earlier years had disappeared, thus intensifying the maladjustment of 
capacity and demand. Also, the increasing demand of earlier years failed 
to materialize. The high prices of coal during the war and post was years 
had given tremendous impetus to fuel efficiency, thereby diminishing to 
an appreciable degree the tonnage that would otherwise have been required. 
The 10-year average of production, 1920 - 1929, was 510 millions tons, or 
69 million tons less than the peak year. Had the trend of production up 
to 1918 continued until 1929, the output at the end of the period would 
have approximated 700,000,000 tons, or 165,000,000 more than was actually 
produced in that year of high industrial activity. 



With capacity 400 million tons in excess of consumer demand in 1923, 
the ensuing price decline was inevitable. Prices dropped sharply in 
1924framl923 levels, and each year thereafter (except 1926) -until the 
summer of 1933. In 1932 the average realization was $1.31 as compared 
with $2.68 in 1923, a decline of over 50 per cent. 

The marked decline in prices was accompanied "by liquidation in 
wages to employees. After the signing of the Jacksonville wage agree- 
ment in April 1924, which embraced operations in the States north of the 
Ohio River, there occurred considerable wage cutting in their competing 
areas in West Virginia and Kentucky, This cutting of wages and prices 
in one section of the industry resulted ultimately in the destruction of 
the negotiated wage structure of the northern states and later, except 
for a minor portion of production, in the complete abandonment of a 
unified or coordinated wage structure. Prices and wages alike were re- 
duced to abnormally low levels, and the industry's financial solvency 
was being destroyed as the process continued. 

Effects of Bituminous Coal Code 

The two major objectives of the Coal Code were to stabilize at 
reasonable levels the prices of coal and the wages of employees. Prior 
to the adoption of the Code hardly 15 per cent of the employees in the 
industry were employed under collective bargaining agreements; under the 
Code nearly 95 per cent of all employees in the industry were so employ- 
ed. The schedules of basic rates of pay set forth in the Code represent 
the most comprehensive correlated wage pattern ever in effect in the in- 
dustry. The structure of wages was maintained throughout the Code period 
and continues up to the present time, with increases in rates of pay in 
April 1934 and again in October 1935. 

A measure of the wage gain of workers is shown in the increase in 
wage costs per ton of coal produced. Detailed statistics covering a 
very large sample of the production in Division I (embracing Pennsylvania, 
Ohio, West Virginia, Kentucky, Virginia,- Northern Tennessee and Michigan) 
shows that the wage costs per ton for May, 1933, averaged 61.4 cents. 
With the -adoption of the Code October 2, 1933, wage rates were so in- 
creased that the returns to labor in this area averaged 94 cents per ton, 
an increase of 53.1 per cent over May. The original rates under the 
Code for this area continued until April 1, 1934, at which time hours 
were reduced from eight to seven per day, and daily and tonnage rates of 
pay were increased. Por the ensuing 9-month period — April through 
December 1934 — the wage cost per ton averaged $1,153. This was an in- 
crease to labor per ton of coal mined of 53.9 cents over that which pre- 
vailed in May, 1933, or an increase of 87.8 per cent. 

Converting. these per ton gains in wages to miners it is found that 
for this division of the Industry, total wage payments were $120,900,000 
greater in 1934 than would have been realized by employees had the wage 
rates in the Spring of 1933 prevailed during 1934. Assuming that 300,000 
miners are employed in this area, the gain per worker due to the Code re- 
gulation of the industrjr amounted to about $400 for the year; or, putting 
it another way and talcing 5 tons per day as the average output per v:ork- 
er for all those employed, wages per day increased about $2.70 over the 
level prevailing in the spring of 1933, prior to the Code. These gains 
to the workers are, of course, tremendous, 


3?or Division III of the Industry (Alabama, Southern Tennessee and 
Georgia) the gains for labor were much the same as in Division I 
(Appalachian Area). The labor cost for May, 1933, was 74 cents per ton. 
For the period April to December, 1934, under the Code, the labor return 
averaged $1.39 per ton, a gain of 65 cents per ton or 87.8 per cent. The 
wage bill for 1934 was increased to $13,833,000, a gain of $5,990,000 
over what it would have, been if the May, 1933, rates had continued in 
effect. Estimating the total number of employees at 18,000, the average 
improvement in annual wages per employee was approximately $330 under the 
Code in 1934, as compared with the pre- Code earnings for May, 1933. 

The two Divisions for which wage improvements have just been cited 
represent approximately three-fourths of the output of the industry. 

Price Control and Realization from Coal Sales under the Code 

Obviously such gains for labor as have been indicated could not have 
been made without considerable increase in the p>rice structure for coal. 
Wages normally constitute between 60 and 65 per cent of the total cost of 
production, and this relationship of necessity continued under the price 
and labor stability program instituted by the Code. For Division I 
(Appalachian Region, excluding Alabama, Southern Tennessee and Georgia) 
the average total cost of production for the 10-month period April 1934 - 
January 1935 was $1,905 per ton, while the realization from sales of coal 
during this period averaged $1.92, a margin of 1.5^. 

The increase in realization in this Area in 1934, after the wage 
and price increases of April, is estimated at 80 cents per ton above the 
average realization of the 9-month period immediately preceding the Code 
in 1933. 

The price structure set up under .the Code, although sharply in- 
creased over pre-Code levels, was adequate only to cover costs of produc- 
tion for the industry as a whole. Some areas, such as' Illinois, Indiana 
and the Bocky Mountain districts., realized net profits, while others - 
notably Alabama and the deep, mines of 'Division IV (Arkansas, Oklahoma, 
Kansas and Missouri) - show net losses, as far as the limited statistics 
permit of any conclusion. Without the stabilization of prices at ap- 
proximately the levels set under the Code, the industry would not have 
been able to carry out the schedule of Code wages. Many complaints arose 
during the last six months of the Code that the fixed prices were not 
being observed by many industry members; and this condition caused many 
operators and the United Mine Workers to work for the passage of special 
legislation designed to correct the shortcomings of the Code, and to 
give the industry the promise of continued stabilization under Government 
regulation. This was achieved with the passage of the National Bituminous 
Coal Conservation Act of 1935, v/hich became law on August 30, 1935. 



Tab le of Contents 

I. History 

A. Historical Summary of the Construction Industr3^ 

If Construction Practices in Ancient Times and the Middle Ages 
2« The Origin of the General Contract System 

3. The Effect of the Degression on the Contract System 

4, Separate Historical Developments of the Major Divisions 
of the Industry 

B. The Building Division and G-eneral Building Contracting 

1. The Master Builder and His Passing 

2. The Handicraft Nature of the Building Trades 

3. Subdivisions of the Building Industry 

4. Technical Progress and its Effect on the Size ^of 
Buildings . 

5 f The Necessity for Ei rep roofing 

6. The Trend towards Apartment House Construction 

7. The Speculative Builder 

8. The Volume Cycle in the Building Industry of 1920 to 1934 

9. Building Cost Trends 

10. Historical Perspective of the Problems of the Industry 

C. History of the Plumbing Contracting Industry 

1. Eirst Bathroom in 3000 B.C. 

2. The Eirst Sewage System in the United States in 1855 

3. Vents Developed in 1874 

4. Municipal Regulation Begins 

5. Municipal and State Plumbing Regulations Become G-eneral 

6. Plumbing Becomes the Best Organized of the Building 
Group s 

7. Recent Notable Developments 

8. Plumbing Increases in Relative Importance 

D. Brie-? History of the Tile and Mantel Contracting Industry 
I* Increases in Tile Demand Before the Depression 

2. Depression Cuts Volume to Half that of 1920 

3. 75 Per Cent of Tile Merchandized Through Contractors 

E. Historical Summary of Heavy Construction and Railroad 
Contractors Industry 

I, The Growth of Railroad Construction 
2« Subway Construction 

3. Major Developments in Ten Classes of Heavy Construction 

4. Advancement in Methods 

5. Developments in Engineering and Contracting 

II. Definitions 

A, Division of the Construction Industry 
1. Three main Divisions 

(a) Highway Division 

(b) Building Division 

(c) Heavy Construction Division 



2. The Divisions Selected for Study 

3. Code Structure not Based on 1-ajor Divisions; Of Twenty-one 
Group Codes Approved, Nineteen were for the Building Divi- 
sion; The Grouo Codes Selected for Study Include a Simple 
Code for General Contractors; High Wage Rates in the 
Plumbing Code; Rigid Pricing Provisions in the Tile Con- 
tracting Code; Heavy Construction with its Diverse Features 

B. Definition of the Construction Industry 

1. The Benefits and Difficulties of a Functional Definition 
2m Controversies Developed 

3. Conflict over River and Harbor Code, with the Home Builders 
Group, over Steel Erection 

4, Complications on Railroad and Public Utility Work 

5. No Action on a Recommended Solution 

6, Public Construction Agencies Could Ignore Code 

C. Definition Covering General Building Construction • 

1. The Broad Aryolication Provided "by the Definition 

2. The $1,000 Limit Created Special Difficulties • 

3. Conflicts Identical with Construction Industry Code 

D. Plumbing Contracting Industry Definition 

!• The Circumscribed Functional Definition for Plumbing 

2. Conflicts that Arose 

3. Interpretations not Issued on Conflicts 

4. Mail Order Houses and Hardware Dealers Take Issue 

5. Ambiguities of Definition Lead to Conflicts 

6. Code Applies Only to Employers 

7. The One-Man Shop Problem Remains Unsettled 

8. Proposals to Improve the Definition 

9. Legal 0-oinions on Definition Coverage 

E. Definition of Tile Contracting Division 

1. The Approval of a Contractual Definition for Tile 

2. The Request for a Functional Definition 

3. Lack of Recorded Conflicts 

4. Provisions for Voluntary Agreement 

P. Definition of Heavy Construction and Railroad Contractors 

1. A Functional Definition Approved for Heavy Construction 

2. Overlapping with Other Construction Croups 

3. Controversies ^rith External Industries 


I. The Scope of the Construction Industry 

A. The Scope of the Construction Industry as a Whole 

1. The Number of Members of the Industry from 1910 to 
1920 and 1930 

2. The Effect of the Degression on the Number of Members of 
the Industry 

3. The Number of Contractors Reported "by the Census of 

4. The Coverage of the Census of Construction 
Agencies Outside the Industry that Engage in Construction 




6. Volume Grouping of Members of the Industry 

7. The Wage Fund in the Construction Industry 

8. The Volume of Construction in the United States for the 
Years 1920 to 1934 

B. The Scope of the Building Division 

!♦ The Number of Members of the Building Construction Industry 

2. The Distribution of General Building Contractors' and of 
Sub- Contractors 

3. The Number of Persons Performing the Functions of the 
Building Division of the Industry 

4. The Number of Employees in the Building Division of the 

5. Labor Costs and the Wage Fund in the Building Division 

6. The Volume of Building Construction 

7. Residential Building Trends 

8. Non-Residential Building Trends 

9. The Vorume of G-eneral Building Contracting 
10. The Volume of Building Sub- Contracting Trades 

C. The Scope of the Plumbing Contracting Industry 

1. The Method of Determining Volume 

2. Material and Lahor Relative Values 

3. The Number of Employers 

4. The Number of Employees 

5. The Number of Union Journeymen Employees 

6. The Wage Fund in the G-eneral Plumbing Contracting Industry 

D. The Scope of the Tile and Mantel Contracting Industry 
1« The Annual Volume of Business 

2. The Number of Members 

3. The Number of Employees 

E. Scope of the Heavy Construction Industrjr 

1« The Volume of Heavy Construction Business Annually as 
Divided Among Fourteen Classes of Heavy Construction 

F. The Scone of the Highway Construction Industry 
A. The Volume of Business 

G. Various Methods, of Estimating Volume of Construction 

II. How the Industry Works, Characteristics of Competition and 
Methods of Meeting Competitive Pressure 

III. Labor Relationships 

The History of Labor Relationships and Collective Bargaining in the 
Different Divisions of the Industry 

IV. Demand Factors 

A. Residential Building Demand 

B. Schcol Building Demand 

!• The Relative Importance of School Building Construction as 
Compared to Non-Residential Construction 

2. What has Happened to School Building Construction 

3. What is the Present Need 

4. The Ability of the States to Provide Needed New Schools 

C. Plumbing Contracting Industry Demand 

1. The Lack of Plumbing Facilities; Air Conditioning, Moderni- 
zation, Effect of Sanitary Regulations, Gas Piping 


V. Heavy Construction Finances 
VI. Highway Construction Funds 

VII. Seasonal Factors in the Construction Industry 

A. The Scope of the Review of Seasonal Factors 

B. Seasonal Factor? Affecting the Industry Generally 

C. Seasonal Factory in: 

1. Building Construction 

2. General Building Contractors 

3. Plumbing Contracting Industry 

4. Tile Contracting Industry 

5. Heavy Construction Volume 

D. Progress Hade in Eliminating Seasonal Factors 

E. Recommendations as to Building Construction 

VIII. Construction Cost and Contract Prices 

A. Cost as Affecting the Industry as a Whole 

1. The Elements of Cost 

2. Differences in Cost Trends between Divisions of the Industry 

3. Expenditures of Construction Firms as Reported to the 
Construction Census 

B. Cost in the Building Division of the Industry 

1. The Turner Construction Company Cost Index 

2. The Interstate Commerce Commission Building Cost Index 

3. The Building Cost Trends from 1910 to 1920, from 1921 to 1928 

4. The Depression and Building Costs 

5. Building Costs under Code Operation 

6. The Effect on Costs of Wage Rates under the Code 

7. The Effect of Invalidation of the Code on Building Costs 
S. Overhead and Profit as Elements of Building Costs 

C- Costs in General 3uilding Contracting 

D- Costs in the Plumbing Contracting Industry 

IX. Financial Position of the Construction Industry 

A. Profit and Losses During the Depression 

B. Asset Losses During the Depression 

C. Bankruptcy Trends 

D- Defaults on Government Contracts 

X. Equipment Cost Factors Affecting the Construction Industry 

1. Labor Saving Liachinery in the Heavy Construction Industry 

A. Early Excavating Machinery 

B. Power Shovels 

C. Comparative Costs of Hand and power Shoveling 

D» Factors Affecting Costs in the Use of Nineteen Other Major 
Types of Heavy Construction Equipment 


I. Decline in Business Volume and Its Effect on the Construction 
Industry as a Whole 

A. The Results of Code Operations in the Construction Industry 
as a Whole 


-25- ■ 

3. General Building Contracting'. 

C. Plumbing Contracting 

D. Tile Contracting 

E. Heavy Construction and Railroad Contracting 

II. The Improvement in Procedure in Awarding Contracts Involving 
Relationships Between Various Groups and Pertaining to the 
Question of Control 

A. Construction Code Attempts to Deal with the Problems of Control 
33. The Results of Code Operations on this Problem 

C. Relinquishment of Control over Architects and Public Agencies 

D. Similar Experiences Within the; 

1. General Building Contracting Industry 

2. The plumbing Contracting Industry 

3. Tile Contracting Industry 

4. Heavy Construction Industry 

III. Inadequacy of Plans and Specifications Affecting the Construction 
A. Code Provisions Designed to Correct the Practice of Drawing 

Inadequate Plans and Specifications 
13. The Result of Code Operations in; 

1. The General Building Contracting Industry 

2. The Plum Ding Contracting Industry 

3. The Tile Contracting Industry 

4. The Heavy Construction Industry 

IV. Excessive Number of Alternate Bids Requested by Awarding Authorities 

A. How the Construction Code Met the Problems 

B. Results of Code Operation 

C. Effect on General Building Contractors 

D. Alternate Bids in; 

1. The Plumbing Contracting Industry 

2. The Tile Contracting Industry 

3. The Heavy Construction Industry 

V. Excessive numbers of Bidders and Demands for Pree Services 
A. Excessive Numbers of Bidders in; 

1. The General Building Contracting 
2- The Plumbing Contracting 

3. The Tile Contracting 

4. The Heavy Construction 

VI. Bid Peddling and Bid Shopping 

A. The Effect of Bid Peddling and Bid Slopping on; 

1. The General Building Contracting 

2. The Plumbing Contracting 

3. The Tile Contracting 

4. The Heavy Construction 

B. Prohibitions Against Bid Peddling and Bid Shopping 

C. Supplemental Code Provisions Reinforcing this Prohibition 

D. The Heavy Construction Sub-divisional Code Granted Permission 
for Bid Peddling and Shopping 


VII. The Rejection of Bids and Immediate Calling for New Bids for 
Purposes of Unfairly Beating Down Prices 

A. Hoy; the Problem Affects: 

1. The General Building Contracting 

2. The Plumbing Contracting 

3. The Tile Contracting 

4. The Heavy Construction 

B. Code Provisions Designed to Meet the Problem 

C. Results of Code Operations 

VIII. Maintenance of Prices and Cost Recovery 

A. The Effect of Price Maintenance on: 

1. The General Building Contracting 

2. The Plumbing Contracting 

3. The Tile Contracting 

4. The Heavy Construction 

B. The Cost Accounting System of the Tile Contracting Division 

C. The Effect of Price Maintenance Provisions on: 

1. The Large Contractors 

2. The Small Contractors 

3. The Consumers 

IX. Loose Credit practices - prequalif ication of Contractors and 
Irresponsibility Amongst Contractors 

A. The Effect of Loose Credit Practices in: 

1. The G-eneral Building Contracting 

2. The Plumbing Contracting 

3. The Tile Contracting 

4. The Heavy Construction 

B. Code Provisions Designed to Meet this Problem 
C- Results of Code Operation 

X. Withholding Payments Due to Subcontractors and Material Lien 
A. The Effect of the Withholding of Payments in: ' 

1. The General Building Contracting 

2. The Plumbing Contracting 

3. The Tile Contracting 

4. The Heavy Construction 

3. Code Provisions Designed to Meet the Problem 

C. Results of Code Operation 

XI. Unfair Backcharging of Subcontractors 

A. The Effect of Unfair Back charging on: 

1. General Building Contracting 

2. Plumbing Contracting 

3. Tile Contracting 

4. Heavy Construction 

XII. Substitution of Inferior Materials 

A. The Effect of Substitution of Inferior Materials on: 

1. General Building Contracting 

2. Plumbing Contracting 

3. Tile Contracting 

4. Heavy Construction 

C "i A r 


XIII. Segregated Contracts and Speculative Building Operations 
A. The Effect of Segregated Contracts and Speculative 
Operations on: 

1. G-eneral Building Contracting 

2. Plumbing Contracting 

3. Tile Contracting 

4. Heavy Construction 

XIV. Unbalanced Bidding on a Unit Price Basis 

A. The Effect of Unbalanced Bidding on the Heavy Construction 
and Railroad Contractors Industry 

XV. Seasonal Variations in Volume of Construction 

A. The lleglect of this Problem in Code Drafting 

B. ITeglect of the Problem under Code Administration 

XVI. Pressure for Liquidation of Investments and Idle Equipment 
Together uith the Problem of Asset Losses 

A. The Effect of the Pressure for Liquidation of Investments 
and Idle Equipment on: 

1. G-eneral Building Contracting 

2. Plumbing Contracting 

3. Tile Contracting 

4. Heavy Construction 

XVII. Increase in Competition Dae to the Number of Employees 

Entering the Contracting Field Because of Inability to Secure 
Employment in their Respective Trades 
A. The Effect of Such Competition in: 

1. General Building Contracting 

2. Plumbing Contracting 

3. Tile Contracting 

4. Heavy Construction 

XVIII. Material Price Stabilisation 

A. The Pactors involving Material Price Stabilization 
as Affecting: 

1. G-eneral Building Contracting 

2. Plumbing Contracting 

3. Tile Contracting 

4. Heavy Construction 

XIX. Specialized or Local Group Interests as Affected by the 
Construction Codes 

A. The Effect of the Construction Codes on Specialized or 
Local Group Interests in: 

1. General Building Contracting 

2. Plumbing Contracting 

3. Tile Contracting 

4. Heavy Construction 

B. Code Provisions Concerning the Problem 

C. Results of Code Provisions 



XX. Compliance as to Trade Practices 

A. Review of Available Data 

B. The Establishment of Trade Practice Complaints Committees 

C- The nature and Volume of Trade Practice Complaints Reported 
D. Distribution of Trade Practice Complaints as Between 

1. General Building Contracting 

2. Plumbing Contracting 

3. Tile Contracting 

4. Heavy Construction Contracting 

5. Construction Industry as a Whole 


I. The Heed for Stabilization and Maintenance of 

A. Wage Rates 

B. Hours of Employment 

C. Other Working Conditions 

II. Decrease of Employment 

III. Annual Earnings and Buying Power 

IV. Accident Prevention 

V. Civil and Social Protection of Labor 


I. The Construction Industry as a Whole 

II. The General Building Contracting Industry 

III. The Plumbing Contracting Industry - 

IV. The Tile Contracting Industry 

V. The Heavy Construction Industry 


I. A Study of the Thirty Distinct Divisions of the Industry not Touched 
on in this Report 

II. Demand Factors Affecting 

A. Residential and Non-Residential Building Construction 

B. Heavy Construction 

C. Highway Construction 

III. A Study of Indebtedness on Existing Building and Other Structures to 
Show Annual Carrying Charges 

IV. A Study of Annual Investment in Construction and the Cost of Procur- 
ing Money for Financing 



V. A Study of the Effect of Tax Policy on the Construction Industry 

VI. A Study of Land Cost and Values Affecting the Construction Industry 
and its Various Divisions 

VII. A Study of Lien Acts as Important Factors in Credit Practices and in 
Promoting Irresponsibility in the Building Construction Industry 

VIII. A Study of Credit Relationships and Credit Practices as they Affect 

A. Building Construction 

B. Heavy Construction 

C. Highway Construction 

IX. A Study of Municipal Building Ordinances 
X. Other Items as May "be Developed 




Preliminary Summary Of Findings 

T he Hi s tor;.'- of C onstruction shows an incomplete transition to an 
industrial status. This transition has "been talcing place during the past . 
50 years and is still under way. Different stages have been reached "by 
general "building contracting, "by plumbing contracting, by tile contracting, 
and by heavy construction. 

Definitions o f th e Construction Industry, designed for legal purposes 
under the N.Pl.A. , raised countless questions. Hundreds of other industries, 
thousands of public agencies and hundreds of thousands of individuals, at 
one time or another, perform the functions of members of the Construction 
Industry, doing construction work for their own use. A majority of these 
other agencies use construction labor from the common pool of the Industry, 
and contractors must compete with them in the struggle for business incident 
to the transformation of construction to an industrial status. 

There was considerable overlapping in the functions performed by the 
members of the various divisions of the Construction Industry. 

The practical method recommended for reconciling the needs of members 
of the Industry with the interests of others performing construction func- 
tions was to establish a functional definition for the Industry and its 
parts, and to issue exemptions to agencies which did not draw their labor 
from the common pool. While functional definitions were written to govern 
major parts of the Construction Industry under N.R.A. , exemptions were not 
granted in accordance with such a criterion. Little progress, during N.R.A. , 
was made in solving this problem of definitions. 

The Scope of the Construction Industry is tremendous, and data for 
it can only be estimated. The number of contracting firms and individuals, 
engaging principally as employers, numbered 167,512 in 1930. In addition 
to these, there was an unknown number of self-employed journeymen who 
occasionally took contracts. In 1920 there were 90,109 contracting firms 
or individuals, and in 1910, 174,422. 

The Number of general Building Contractors was 37,579 in 1929, 
according to an incomplete figure. 

The Number of Plumbing Contractors has been about 25,500 since 1929. 

The Number of Tile Contracting Firms was approximately 3,000 in 1929 
and 2,354 in 1933. 

The number of Heavy Construction General Contractors was 3,082 for 
1929 - also a partial figure. 

The Number of Employees in the Construction Indust ry numbered between 
3,000,000 and 3, 500," 000. 

5|kg_..? a g e V olume of the Construction Industry , excluding the salaries of 
office workers, amounted to approximately $3,370,000,000, in 1929. 



The Number of Employees of Gen eral Building Contractor s cannot be 
estimated. They involve principally three trades, carpenters, "bricklayers, 
and common laborers. Of these there were about 1,520,000 in 1930, but all 
of them would not be employed by general building contractors exclusively. 

The TJage Volu me of Employees of General Building Co n tractors cannot 
be estimated. Tor the Building Division of the Construction Industry as 
a whole it is estimated at approximately $2,420,000,000 in 1929. 

The Number of Employees of Plumbing Contractors is approximately 
150,000, exclusive of technical and office workers. 

The TJage Volume of Employ ee s in the Plumbing Contracting Industry , 
excluding office workers, is estimated to have been approximately 
$181,400,000 in 1929 and $59,100,000 in 1933. 

The Number of Employees in the Tile Contracting Industry is estimated 
at about 19,400 in 1929. TJage volume data are .lacking. 

ffiie Humber of Employees in Heavy Construction is not available. 
Combined with those in Highway Construction, however, it is estimated that 
there were between 1,000,000 and 1,200,000 in 1929 and 1930. 

The TJage Volume of Heavy C on struction Employees is not ascertainable; 
but combined With that of Heavy Construction it was approximately 
$950,000,000 in 1929. 

• The Total Volume of Construction reached its peak in 1928, when it 
was about $11,975,000,000. It was 'lowest in 1933, with about 
$3,108,000,000, or 26 per cent of the 1928 volume. During 1934 the volume 
increased approximately $918,000,000 over 1933, being about $4,026,000,000, 
or 34 per cent of the 1928 total. 

The Volume of Building Construction rose from a depression low, in 
1921, of $3,786,000,000 to a maximum in 1928 of $8,237,000,000. Prom the 
latter, it declined rapidly to 1933, when it was $1,335,000,000. The 1933 
volume was approximately 16.4 per cent of 1928 and 35.8 per cent of 1921. 

The Volume of Plumbing Contracting during the depression of 1921 
totaled about $344,100,000. It increased annually until it reached 
$749,900,000 in 1928. It hit a low point in 1933 of approximately 
$147,800,000, or about 19.7 per cent of the 1928 volume, and 43 per cent 
of the volume during the depression of 1921. During 1934 the dollar 
volume increased over 1933 approximately $43,520,000 to about $191,320,000. 

The Volume of Tile Contracting rose from approximately $39,840,000 
in 1920 to a peak of $84,700,000 in 1928. Prom 1928 to 1933 it declined 
to about $9,000,000 or about 10.6 per cent of the peak. During 1934 tile 
contracting increased over 1933 about $3,000,000, making a total of about 

The Volume of Heavy Construction was not estimated prior to 1925, 
when it was approximately $1,816,000,000. This volume increased to apeak 



in 1930 estimated at $2,233,000,000. It declined to $776,000,000 in 1933', 
or about 34,8 per cent of the volume of 1930. During 1934 the volume of 
heavy construction increased approximately $204,000,000, reaching a total 
of $981,000,000, or approximately 126 per cent of the 1933 volume. 

. .{The Volume of Highw ay Construction was not estimated prior to 1923, 
when it was about $1,047,000,000. It reached its peak in 1930 with 
$2,036,000,000, which was about 194 per cent of the 1923 volume. It de- 
clined from 1930 to about $997,000,000 in 1933, or 49 per cent of the 1930 
peak. During 1934 the volume increased approximately $360,000,000 to a 
total of about $1,357,000,000. 

The Present pote ntial D emand for Public School Build ings amounts to 
approximately $3,960,000,000. The prospects for financing this demand 
through state, county, and local school agencies appear remote. 

Seasonal Factors in the Construction Industry constitute one of its 
most serious problems. These seasonal factors vary with each Division. 
Most rapid progress towards eliminating seasonal fluctuations has been made 
in the Building Division. In 1922 the extreme seasonal variation was about 
45 per cent of the peak month; but this had declined to 20 per cent in 

Progress in the Plumbing Contracting Industry is indicated. There was 
a seasonal spread of about 50 per cent of the peak in 1922, but of only 20 
or 25 per cent in 1929. 

Seasonal Variations in Heavy Construction differ widely with the dif- 
ferent types of operations. Weather conditions are a dominant factor. On 
grading operations, which are affected by rain and excessive cold, January 
employment in 1929 was about 34 per cent of the August peak. On subway and 
tunnel work in the same year, however, employment in the low month was 
approximately 70 per cent of the peak. 

The progress I.iade in Heavy Construction -toward lessening seasonal 
variations is not measurable at this time. 

The Effect of Cod e Operation on seasonal activities was negative. 

Construction Costs and Contract Prices have shown different trends in 
the various divisions of the Industry, due to different rates of mechaniza- 
tion and of improvement in management and technique. Mechanization was . 
greatest in the Heavy and Highway Divisions of the Industry, and least in 
the Building Division. 

Building Costs rose sharply from 1914 to a peak in 1920, when they 
were 252 per cent of 1914 level. In 1928 they stood at about 190 per cent 
of 1914; and in March, 1933, they were at 130 per cent of the 1914 level. 

The Effect of N.R.A . and of other New Deal policies became manifest 
early in 1933, when building construction costs rose from quarter to quarter, 
reaching a recent peak of 165 per cent of 1914, in October, 1934. Since 
that month building cost levels have tended downward until, in September, 
1935, they had lost five points and were at 160 per cent of 1914. 



Heavy Constru ction Costs have varied in the different sections of 
the Heavy Construction Industry- Grading costs, "being more extensively 
affected "by mechanization, reached a peak in 1920, at 250 per cent of the 
1915 level. Steady, sharp declines began in 1924, when such costs were 
about 164 per cent of the 1915 level, until, in 1933, they had declined 
to a low point of about 98 per cent of 1915. Baring 1934 they increased 
only slightly, reaching a point approximately equal to 1915 costs. Other 
sections of the Heavy Construction Industry varied in their cost movements, 
tunnels and subways reaching a low of 111 per cent of the 1915 level in 
1933, and moving upward in 1934 to 122 per cent. Costs of bridges, trestles, 
and culverts reached a low point at 122 per cent of the 1915 base during the 
years 1932 and 1933. In 1954 they increased 136 per cent of the 1915 level. 

The Development of Machinery in the Construction. Industry has been 
marked since about 1919*, It has been most pronounced in the Heavy and 
Highway Construction Industries. 

In Heavy Construction Grading the improvement in man-hour production 
in loosening average earth ran as high as 6,675 per cent of previous hand 
methods. In loading operations mechanisation has produced an increase in 
man-hour productivity up to 6,664 per cent over hand-loading. In combined 
loosening, loading and hauling excavated material the improvement in man- 
hour productivity varies in accordance with the length of the haul and 
general conditions, as terrain, etc. In 500-foot hauls the productivity 
per man-hour has been increased up to 657 per cent. With hauls of about 
one mile it has been increased up to 855 per cent. 

Mandatory Minimum Percentage Mark- Up s for Overh ead which appeared in 
eight of the Supplementary Construction Codes, were not economically sound, 
if experience with the Tile Contracting Code is a criterion. In 1932, 
14.6 per cent of 84 firms who answered a questionnaire operated at less 
than the 20 per cent overhead required under the Code. They performed 
about 41.9 per cent of the volume reported. For 1933, 9.4 per cent of these 
firms reported the performance of 20.2 per cent of the reported volume at 
less than 20 per cent overhead. 

The Decline in Private Construction Activity was halted during the 
Code period. An upturn in private work began in March, 1935. During the 
six months following this, the average monthly volume of private construc- 
tion work was 167 per cent of the average for 1934, 166 per cent of 1933, 
and 163 per cent of 1932. Adjusted to the cost of construction, these six 
months 1 contracts, averaged 167.5 per cent of 1934, 145 per cent of 1933, 
and 138 per cent 'of 1932. 

The Improvement of Procedure in Awarding Contracts was one of the 
central features of pre-Code and Code drafting activity in the Construction 
Industry. In administration, the Construction Code Authority, by stating 
that architects were not awarding authorities and V thus releasing them 
from Code control, practically nullified the progress on this problem made 
in Code drafting. 

By legal ruling State and local public officials were also exempted 
from Code control. Owners, not engaged in contracting, denied that they 



were members of the Industry; and difficulties were enhanced in obtaining 
compliance from them "because of the release of architects from Code control. 

The exclusion of architects and public officials from control by the 
Codes, as cited above, together with the difficulties encountered in con- 
trolling the practices of owners, limited the efforts which were made to 
improve many trade practices which the Code sought to regulate. Thus, 
little progress was made under the Codes in preventing the issuance of in- 
adequate plans and specifications, the calling for an excessive number of 
alternate bids, the inviting of excessive numbers of bidders and the demand- 
ing of free services, the rejecting of bids and immediate calling for new 
bids for the purpose of beating down prices unfairly, the correction of 
loose credit prcictices, the pre-qualif ication of contractors, the removal 
of irresponsible contractors, or the harmonizing of specialized or local 
group interests. 

Progress was made in eliminating bid peddling and bid shopping, 
although at entirely different rates in the different geographical sections 
and in the different divisions of the Industry, This practice, prohibited 
under the Code, was not wholly eliminated in any portion of the Industry, 
while in some divisions the progress made was very slight. 

Price Llainte nance Provisions were effective in raising prices and 
procuring the recovery of costs to a marked degree in the Tile Contracting 
Division of the Industry. In ten other divisions having price maintenance 
provisions, results were less noticeable, and the effect varied widely 
from one to another. The vast majority of the Industry operated without 
such provisions. 

Limited Progress was. made in eliminating the practice of withholding 
payments due to sub-contractors and material men. 

ITo Progress was made in eliminating the substitution of inferior 
materials, in solving the pressure for liquidation of investments in idle 
equipment, or in limiting the increase in competition, due to the number 
of employees entering the contracting field. 

Legal Aspects of Inter-State and Intra-State Commerce reveal that 
in some classes of work within the Industry from 40 to 56 per cent of all 
work is normally performed Vy contractors from outside States, and that in 
all groups inter-state competition exists. 

Practically all construction materials move in inter-State commerce 

and are directly affected by the conditions in the Construction Industry, 

For example, gypsum is produced in only nine States and must be shipped to 
the remaining 39. 




Table of Contents 



I # Power 

A. Growth- of Electrical power Through Discovery, Invention and 

II. Light 

A. Development of Arc-Light, Incandescent Light, and Radiology 
B # Commercial Effect 

III, Heat 

A. Development of Heat as Produced "by Electric Energy 
S # The Industrial Furnace 

IV. Communication: 

A. Development of the Telegraph Including Commercial Exploitation 


(l) Undersea Cable Communication 


The Telephone 

(l) Invention 

(2) Development 

(a) Physical 

(b) Commercial 


The Radio 

(l) Invention • 

(2) Development 

(3) Application 

(a) Telegraphy: 

(b) Telephony 

(c) Broadcasting 



The Street Railway 

(l) Invention 

(2) Development 

(3) Decline 


Electrified Railways 

(l) Causes for Development 

(2) Progress 


Marine Transportation 

(1) The Launch 

(a) Invention 

(b) Development 

(c) Decline 

(2) The Submarine 

(a) Invention 

(b) Development 

(3) Ocean-going Vessels 

(a) Adaption of electrical propulsion 



D. Road Vehicles of Passenger Type 

(1) Invention 

(2) Development 

(3) Decline 
E # Elevators 

(l) Influence upon 

(a) Construction 

(b) Real Estate 

VI. Miscellaneous 

A. Home Appliances 
B« Earm Electricity 
C. Office Appliances 

(l) Influence upon Employment of Office Workers 

VII. I n dustry During the Code Era. Brief Resume 

VIII. Conclusions 


I. Early Financial Difficulties 

II. Financial Assistance to Equipment Market 

III. Era Prior to Early Consolidations 

IV. Internal Growth of Selected Companies 
A # General Electric Company 

B. Westinghouse Electric and Manufacturing Company 

C. Western Electric Company, Inc. 

V. Capital Structure: Earnings, and Dividends, Surpluses of Selected 

A # General Electric Company 

B # Westinghouse Electric and Manufacturing Company 
C # Western Electric Company, Inc.. 

VI. Aggregate Investment - Current and Comparative With Previous Years 
A* Industry 
B # Selected Concerns 


I. General Discussion 

II. General Statistics 

III. Rank of the Industry 

IV. Geographic Distribution 

V. Size of Establishments by Value of Products 


VI. Size of Establishments by Number of Wage Earners 
Til- Value of all Electrical Manufacturing Industry products 
VIII. The Three Major Industries 

IX. Competition 

(1) Domestic .-. 

(2) Foreign 

X. Monopolies 

XI. Tables • ■ .. 

XII. Charts 


I. Employment, Hours, Wages, Etc. 

A # Relation of Electrical Manufacturing Industry to All .Other 

Industries on Basis of Number of Wage Earners 
B # Concentration of Labor in the Industry 
C # Distribution of Wage Earners by , Size of Establishments Based 

on Dollar Volume by Census of Manufactures 
D # Growth of Employment. 
E # Distribution of Wage Earners and Establishments in .the E.M«I. 

by Prevailing Hours of Labor in. 1929' 
P. Average Hours and Wages in the E.M. I., Including Radio and 

G. Hours and Hourly Rates in the Radio Industry 
R m The Thirty- six Hour Week'. .; ' . k - 

I. Minimum Wages Set Up in the Code 
J. Overtime •/*•.....*. 
K. Exemptions 
L. National Hourly Wages Based on Figures Compiled by the National 

Industrial Conference Board 
M« Average Weekly Wages, Based on Figures Compiled by the National 

Industrial Conference Board 

II* Technological Changes and Their Effect on Employment in the Electric 
Lamp Industry 
A # General Discussion 
B* The Effect of Technological Changes on Employment 



I. Introduction 

A, Type of Survey 

B # Sources of Information Consulted 

II. Development of Distributive Structure 

A. The Sale of Electrical Products Secondary to the Sale of 
Electric Energy 



B, Mode of Meeting the Consumer Demand Created "by Creation of 

Early Central Power Stations 
C # Public Utilities Inducing the Purchase of Electric Energy 

Consuming Equipment and Devices 

III. Evolution of the Individual Identity of the Electrical Manufacturmg 

A, Increasing potential Supply of Electric Energy 

B # Growing Demand for ''Tried and Tested" Electrical Products 
C» The Market for JJcw Electrical Devices 

D. The Sale of Electrical products No Longer Secondary to the . 
Sale of Electric Energy 

IV. The Distributive Structure 

A* Channels of Distribution 

B # Percentage of Manufacturers* Total Sales Moving Through the 
Several Distributive Channels 

V. Wholesaling 

A # Manufacturers 1 Sales Branches 

B. Independent Wholesale Establishments 

C« Comparison of Operating Costs for Wholesale Establishments 
D, Interstate Character of the Electrical Manufacturing Industry 
as Indicated by Sales To and By Wholesalers 

VI. S^les Direct to Consumers 

A. Class of Manufacturing Establishments Utilizing the Direct to 
Industrial Consumers Method of Distribution 

B. Character of Products Prominently Identified with the Direct 
Method of Distribution 

C. Direct Sales of Electrical Household Appliances 

VII. Pricing Practices 

A # Price Trends for Selected Items 

B. * G-eneral Factors Affecting Price Changes 

C. Consignment Selling 

D # The Effect of patents Control on Prices 

VIII. Installment Selling 

A. Electrical Equipment 

B, Household Appliances 

C« Code Provisions Dealing With Deferred Payments 

IX. Distribution Problems as Reflected in the Code for the Electrical 
Manufacturing Industry and Subdivisions Thereof 
A. The Provisions as Submitted by the Industry 
3. The Effect of Code Provisions in Operation 


I. Exports 

A» United States Exports in Electrical Goods 

B # Importance of Electrical Exports in the Export Trade of the 
United States 



C. Position of the United States as an Exporter of Electrical 


D # Destination of United States Exports of Electrical Products 

E, Fluctuations in Trade with Geographical Areas 

P. Relative Importance of Foreign Markets 

Gr« Exports of principal Products 

H, Exports of Radio Receiving Sets 

I # Principal Markets for Radio Sets 

J # Exports of Electric Household Refrigerators 

K« Principal Markets for Electric Refrigerators 

L # Branch Plants Abroad 

II. Imports 

A. Imports of Electrical Products 

B. Principal Countries of Origin 
C» Principal Products Imported 
D» Tariff Aspects 

E« Taoles 




Preliminary Summary of Findings 


The Electrical Manufacturing Industry is variously classified by 
agencies that collect and record data relating to it. It has "been neces- 
sary, therefore, for the study to contemplate the Industry in its broadest 
scope and to embrace the manufacture, importation, distribution and ex- 
portation of machinery, apparatus, equipment and supplies used in the 
generation, storage, transmission or utilization of electric energy* 


Many of the basic discoveries and inventions in the field of elec- 
tricity occurred prior to 1900. Nevertheless, the results of new re- 
searches have in recent years revolutionized the mode of industrial and 
domestic life. Electrical products will doubtless play an ever increas- 
ing part in the future life of the nations. 

Many obstacles were met in establishing the Industry. The early 
days in this respect were days of tribulation. The various milestones 
in the formation and development of the Industry are clearly marked in 
the record of a few pre-eminent concerns which can trace their organiza- 
tion to the first days of commercial development, and which still main- 
tain their dominant positions in the Industry. The growth of these con- 
cerns was due to consolidation, absorption and internal expansion. Grad- 
ually a gigantic financial structure evolved. I n the year 1930, 1,317 
concerns reported as electrical manufacturers to the Bureau of Internal 
Revenue, and showed total assets amounting to $1,497,489,595. The capi- 
tal stock of one pre-eminent concern was in the hands of 186,098 persons 
as of June 30, 1935; and as of December 31, 1934, 49,947 persons held 
preferred or common stock in a second concern. 


The corporate form of organization is prominent in the Electrical 
Manufacturing Industry, and is represented by both the owned and con- 
trolled and the controlled but not owned types. In the case of one con- 
cern having 422,470 shares of no par stock in issue, about 68 per cent 
was owned by the company directors. Contrasted with this case is that 
of another concern having more than 28,000,000 shares of common stock 
outstanding, less than one per cent of which was controlled by directors 
of the company. Analysis shows that the investing public has made sub- 
stantial contributions to the capital structure of the Electrical Manu- 
facturing Industry. 

According to Bureau of Internal Revenue returns covering the classi- 
fication "Electrical Equipment and Machinery and Radios, Complete or 
Parts," the Industry showed a net profit, before deducting income tax, 
of $87,973,850 in 1930. In each year of the period 1931 through 1933 a 
deficit was shown. The greatest deficit occurred in 1931 and amounted 
to $51,478,309. The 1933 deficit, amounting to $16,134,236, indicates 



that the industry is on its way to recovery; and this is "borne out "by 
earnings for the first six months of 1935, as reported for designated 
electrical manufacturing concerns by recognized authoritative finan- 
cial reports, 


The Electrical Manufacturing Industry was perhaps the most diver- 
sified industrial group operating under a single basic code. A super- 
visory agency charged with the administration of the Code reports that 
it had established approximately 170 product sections. The number of 
items produced has "been estimated to approximate 30,000. In 1929 the 
Census of Manufactures reported a total value of production for the In- 
dustry of $2,300,915,572. Manufacturing operations are concentrated in 
eight states, all of which are east of the Mississippi River and north 
of the Mason-Dixon Line, and which account for approximately 90 per cent 
of the total value of production. 

According to the Census of Manufactures, there were, in 1929, 1802 
establishments in the Industry; and measured by value of production it 
was sixth in rank of all manufacturing industries. In 1929, 18.9 per 
cent of the total number of establishments produced 87.7 per cent of 
the total value of products. Each of these concerns did a business for 
the year in excess of $1,000,000. 

The Electrical Manufacturing Industry produces "both durable capital 
goods and durable consumer goods, the former being estimated to con- 
stitute about 70 per cent of the total value of sales. 

The value of production in 1931 and in 1933 showed declines from 
1929 of 48.4 and 70.7 per cent, respectively. 

The sales billed by three prominent electrical manufacturing con- 
cerns in 1925 amounted to 48 per cent of the total value of production 
for the Industry. This percentage declined in 1927 and 1929 to 39 
per cent. It increased to 43 per cent in 1931 and declined again in 
1933 to 33 per cent. 


In 1929, the industry employed 328,722 wage earners. This represented 
increases as follows: from 1889, 3,635 per cent; from 1899, 682 per cent; 
from 1919, 54.8 per cent. 

The Census of Manufactures shows that in 1929 the Industry ranked 
sixth among manufacturing Industries with respect to the number of wage 
earners employed. 

Of the total employed in 1929, 88 per cent were in establishments 
located in eight states. Three per cent of the total number of estab- 
lishments employed more than 1000 wage earners apiece, accounting for 
57.4 -per cent of the total employment. 



In 1933, 24.7 per cent of the total number of wage earners were em- 
ployed in establishments located in cities with a -copulation of 500,000 
and over; and 26.3 per cent were in cities with a population of 100,000 
"but under 500,000. 

According to the Bureau of Labor Statistics factory employment in the 
Industry showed a continued decline from December, 1929, to March, 1933, 
the decrease amounting to 60 -oer cent. Factory payrolls and man-hours 
showed a more rapid rate of decline than employment during this period. 
In March, 1933, payrolls were 78 per cent below December, 1929, and man- 
hours. 77 per cent lower. With the advent of the codes of fair competi- 
tion an improvement was shown in the conditions of labor. In September, 
1933, the following increases were shown from the previous March: em- 
ployment, 48 per cent; payrolls, 69 per cent'; man-hours, 74 per cent. In 
September, 1934, increases over September, 1933, were shown as follows: 
employment, 12 per cent; payrolls, 22 per cent; man-hours, 81 per cent. 
The respective indexes remained relatively constant during the period 
September, 1934, through June, 1935. Thereafter, a sharp increase v/as 
recorded, and September, 1935, showed the following increases over the 
■orevious June: employment, 14 per cent; payrolls, 19 per cent; man-hours, 
24 per cent , 


Beginning with the period 1932 and continuing through the first six 
months of 1933, the trend of average hourly rates for factory workers de- 
clined constantly; and in June, 1933, the downward movement established a 
low of about 50 cents per hour. This represented a decrease of about 20 
per cent from the average for the year 1929, which was 59.4 cents per 
hour. During the latter half of 1934 the loss from 1929 was recouped, 
and the average hourly wage rate remained at approximately a 60-cent level 
until July, 1935. 


The average hours worked per week during the years 1929 and 1930 was 
about 49. Thereafter there was a continued decline until April, 1933. 
Through the months of April, May and June, 1933, a sharp increase devel- 
oped, the latter month establishing a new level of about 38-g* hours. Dur- 
ing 1934 and the first six months of 1935 there was a definite tendency 
to establish the average hours worked per week at about 35, 


Weekly wages averaged $29 during 1929 and the first six months of 
1930. Thereafter followed a downward movement with a low level in August, 
1932. During that month average weekly wages were about $17. This de- 
cline was not regained. During the year 1933 and the first quarter of 
1934 the general level was about $19.50 per week. For the last six 
months of 1934 the average was approximately $20.50 and during the first 
six months of 1935 about $22. 


It appears, therefore, that under the administration of the Code of 
Fair Competition the decline in average hourly wage rates from 1929 was 



regained. Average hours per week were established at approximately 35, 
which was well "below the 1929 level of 49 hours. The operation of these 
two factors established a new weekly wage level of approximately $20*50; 
hut this was about 30 per cent below the 1929 figure. This shows that if 
the average weekly wages of. 1929 were to have been maintained under the 
maximum hour limitation of the Code, an average hourly rate about 38 per 
cent above that of 1929 would have been required. It has been shown that 
following July, 1935, increases in employment, payrolls and man-hours 
were recorded, 


Data covering average hours per week and average hourly rates show 
that in September, 1935, the average hourly rate declined about 4 per cent 
from the previous June. Average hours per week in September, 1935, were 
about 9 per cent in excess of those for the previous June. Although the 
average hourly rate in September, 1935, showed a decline from June of the 
same year, the average weekly wage, as a result of the increase in the 
weekly hours of work, showed an increase of about 4 per cent for the 


The degree to which automatic machinery has replaced man-hours of 
manual labor is indicated in the case of the electric lamp assembly 
plants. It must be borne in mind, however, that the technological changes 
that have taken place in the Electric Lamp Industry, and that have result- 
ed in a decided economy of labor, are not representative of the Industry 
as a whole or of the majority of its products. According to a study 
made by the United States Department of Labor of the productivity of 
labor and of the time required per unit output in electric lamp assembly 
plants for the period from 1920 to 1931, 362,000,000 electric lamps were 
made in the United States in 1920. The number fell off sharply in 1921, 
then increased to 644,000,000 lamps in 1929, and thereafter declined to 
approximately 503,000,000 lamps in 1931. 

In 1920 about 59 per cent of all labor engaged in the Electric Lamp 
Industry was employed in assembly plants. In 1920 the average number of 
workers in lamp-assembly plants was 17,283, but by 1931 the number had 
declined to 5,817 workers. 

In 1920 the average number of lamps produced per man-hour amounted 
to 10; in 1931, the average was 44. 

Production in 1920 amounted to 362,000,000 lamps, requiring 17,283 
employees working 36,145,000 man-hours. This volume would have required 
in 1931 8,236,150 man-hours and employing, based on the average hours 
1920-1931, 3,912 workers. The decline, assuming equal production in both 
years, amounts to 77 per cent, due to the change in the output of units 
per man-hour. 

Due to the increase in production in 1931 over 1920, which amounted 
to 141,210,000 lamps, approximately 6,695 additional workers would have 
been needed in the later year on the basis of the production per lamp 
per man-hour in 1920. But, due to the change in the production rate the 
addition actually amounted to only 1,525 workers. 



The Code of Fair Competition for the Electrical Manufacturing Indus- 
try established a "basic 36-hour week as contrasted, with a "basic 40 hour 
week in most codes for manufacturing industries. The discrepancy was a 
source of irritation to members of the Industry, particularly in cases 
where an employer's manufacturing establishments were subject to multiple 
code coverage. 

The minimum wage provision of the Code for the Electrical Manufac- 
turing Industry contained the "July 15, 1929" clause. N.R.A. records 
show that the result was most unsatisfactory. 

• The provisions of the Code made a distinction "between employees en- 
gaged in processing operations and in labor directly incident thereto, 
and all other factory employees. Satisfactory definition of the two 
classes, however, were never arrived at. 

> ■■ 


Because of the diversification of the products of the Electrical 
Manufacturing Industry, and "because of the range in the size of its units, 
there are variations in the channels of distribution utilized. The method 
of distribution may be influenced "by any or all of the following factors: 

(1) the physical nature of the product, (2) the price of the product, (3) 
the size of the producing plant, (4) the financial strength of the pro- 
ducer, (5) the completeness of the line manufactured in a given plant, 

(6) the nature of the market, (7) the type of consumption - producers goods 
or consumers goods - and (8). the marketing machinery which the Industry 
has developed for a given product. 

According to the Department of Commerce publication "Distribution of 
Sales of Manufacturing Plants" for -1929, the factory sales of this Industry 
were distributed as follows: (l) to industrial consumers, 38.6 per cent; 

(2) to wholesalers, 31.4 per cent; (3) to manufacturers', own wholesale 
branches, 20.8 per cent; (4) to retailers, 5;9 per cent; (5) to manu- 
facturers 1 own retail branches, 3.0 per cent; (6) to household consumers, 
0.3 per cent. 

TThile manufacturing operations are concentrated in eight states, 
which accounted for approximately 90 per cent of the total value of pro- 
duction in 1929, the Census of Wholesale Distribution shows that these 
same eight states accounted for approximately 62 per cent of the value of 
sales by wholesalers. 


An analysis of data published by the United States Department of 
Commerce which covers the wholesale distribution of electrical products, 
indicates that the operating expenses of independent wholesale merchants 
weye considerably above the operating expenses of manufacturers' whole- 
sale branches. For both classes of establishments the data show a decline 
in operating expenses as the dollar volume of annual sales has increased. 



The foreign trade in electrical products reached a peak in 1929, when 
the combined value of exports and imports was $124,000,000. The low point 
of the post-war period occurred in 1932, when the combined value was ap- 
proximately $44,000,000. In 1934 the foreign trade in electrical products 
amounted to about $74,000,000. which was an increase of 65 per cent over 
1933 and of 69 per cent over 1932. The trade "balance of our foreign com- 
merce in electrical products is favorable, exports being approximately 
95 per cent of the annual total. 

In 1929 exports of electrical products accounted for about 5 per cent 
of the total value of manufactured exports. In this field the United- 
States was the leading exporting country in 1934. These exports enjoy 
world-wide distribution. 

Two outstanding items of export are (l) mechanical refrigerators and 
parts and (2) radios and parts. These two items accounted for about 32 
per cent of the total value of electrical exports in 1934. The principal 
electrical product imported is the incandescent lamp. In 1934 this item 
accounted for 46 per cent of the total value of imports. 

There is no indication that the Code for the Electrical Manufacturing 
Industry had any effect on its foreign trade. 




Table of Con te nts 


I. Introduction: Definition of Industry 
Am Sale Primarily to Farmers 
E. Constituents of Fertilizer, Function of Fertilizer Elements, 

C. Vertical Nature of the Industry 

II. Processes of Manufacturing Fertilizer 
A* Fertilizer Grades 

1. Use of Fillers in Fertilizers 

III. Types and Location of Fertilizer Plants 

A. Productive Capacity of the Fertilizer Industry 

IV, Distribution Problems 

A. Price Cutting and Guarantee Against Decline 

B. Rebates 

C. Excess' Number of Grades 

V. Industry Cooperation for Self-Government 
A* National Fertilizer Association 
3« Colonial Development Co. Ltd. (1903) 

1. Price Fixing - Allocation of Production 
C. "Twenty Points" Code (1924) 
Dm Code Suggested ''ay Department of Justice (1927) 

E. Federal Trade Commission - Trade Practice Rules (1929) 

F. rational Industrial Recovery Act 


I. General Labor Conditions 

A. Job Classification 

1. Importance of Common Labor 

B. j 'umber of Employees 

1. Seasonal Variation in Employment 

2. Geographic Distribution of Labor 

0. Factors Affecting Labor Supply 
4. Employment ^y Size of Business 

Cm Labor as a Cost Fa.ctor 

Dm Hours and Wage Rates During Pre-Code Period 

1. Wage Differentials 

E. Labor Organization in the Industry 

F. The Labor Provisions of the Code 
1 • Ac c orapl i shment s 

2. Post-Code Changes in Labor Conditions 

G. The Proposed Voluntary Labor Agreement 




I. Materials as a Cost Factor 

A. Interstate Characteristics of Rau Materials 
B« Price Factors Affecting Ran Materials 

II • llitrogen Carriers 

A. Alternative Sources of Supply 
1. Supply of Chemical Nitrogen 

2» Consumption of Chemical Nitrogen 

B. Exports of Nitrogen 

III* Potash 

A* Material Sources of Potash 

3. KnO Basis of Comarison 

C» Domestic Production and Consumption of Potash 

Dm Exports of Potash 

E. Price History of Potash 

IV* Phosphate Rock and Sun e mho senate 
A* Sources of Phosphorus 
B« Sources of Crude Phosphates 
C* Exports of Crude Phosphates 
Dm Price History of Phosphate Rock 

V » Su p e rph o spha t e 

A. Domestic Production, Imoorts, Exports * Price History 


I • Total Annual Sales 

A. Geographic Variations in Use 
B« Quantity Con suae d "by Kind 

1« Needless Multiplicity of Grades 
C« Seasonality of Sales 
D. Relation. of Farm Income a.nd Sale of Fertilizer 

I, Credit as a Factor in the Distribution of Fertilizer 
IS* Probable Future Trends in Consumption 

lift Distribution Channels and Methods 

A. Percentage of Sales Through Different Channels 

1. Shifts During Code 

B« Interstate Movement of Fertilizer 

III. Prices 

A« Factors Affecting the Farmer's Price of Fertilizer 
1« Cost of Manufacturing as a Price Element 

2. Cost of Raw Materials the Chief Price Element 
3. Credit as a Price Factor 

1« Importance of Farm Credit 

2, Cost of Credit Relatively High 

3ft Credit Conditions in the Industry Prior to the Code 

4» Ruinous Credit Practices 

C« The Retail Price Situation Prior to the Code 



IV. The Code Provisions as to Price and Cost 
A. General Features 

1« Sales Below Cost Prohibited 
2. Uniform Cost Accounting System 
3« Compliance with Cost Provision 

a P Experience under the Open Price Filing Prevision 
b. Schedules Piled during the Code 


la Association for Code Preparation and Presentation 
A« Organization 

Ba Representative Nature of Code Authority 
C. Changes in Code Authority Organization 

II a Trade Zones 

A. Approval of Sub- Zones 

III. Zone Executive or Administrative Committees 

A. Functions, Zone Rules, Effects of Rules Adopted 

IV a Code Authority By-Lavs and Procedure 

Va Budget and Method of Assessment 
At Receipts and Expenditures 

VI. Trade Practice Complaints Committee 
A a Plan of Procedure 
3a Organization 
C. Effectiveness of Operation 

Vila Labor Complaints Committee 

Villa Rules and Regulations 
A a Purpose 
3. Approval "by NRA 

IX. Code Compliance 

A. Complaint e Handled 
3a Ty;oes of Complaints 

C. Difficulties Encountered 

D. Results Obtained 


I. Adaptability of the Code to the Industry 

II. Analysis of Code Operation 

III. Results Achieved Under the Code 

IV. Recommendations for Consolidating 1IRA Gains 

A. Analysis of Effectiveness of Proposed Voluntary Agreements 
Ba Conclusions on the Necessity for Special Legislation 


. ...~49- 

V* Issues Requiring Further Investigation 
Ac. Suggested Procedure 


I, Documentary Evidence 

II. Statistical Tabulations 




Preliminary Summary of Findings 

The Farmer the Sole Consumer of Fertilize r 

Hie peculiar problems as well as the importance of the Fertilizer 
Industry ore attributable to the fact that it has only one customer — 
the farmer. Fertilizers are used to replenish or supply plant food 
deficiencies in the soil, so as to improve the yield and quality of 
crops* 'Hie farmer's demand is highly seasonal and relatively inelas- 
tic in response to price , depending primarily on his own income in the 
preceding year and to a lesser extent on his credit facilities* 
The In&ustrytg problems are rendered more aciite because so large a 
proportion of the fertilizer is used on a fev: crops like cotton which 
consumes 30$, and tobacco. 

Only one- third of the farmers of the United States use fertilizer, 
since not all soils need additional plant food and some lack the water 
without which fertilizer is ineffective. Fertilizer is mainly used 
along the Atlantic Seaboard and in the Old South, where the soil has 
been depleted by the system of cropping* Fertilizer is a heavy mater- 
ial with low specific value; and high freight rates have caused the 
concentration of a large percentage of the plants in the main consum- 
ing areas* 

Statistics of the Industry* s Iirroortance 

In the last fiscal year some 6,300,000 tons of fertilizer were 
soli, with an estimated retail value of $158,500,000. The Industry, 
in 1933, the last Census year, employed an average of 13,063 wage earn- 
ers, with an annual payroll of $7,274,000. For the ten Census periods 
since 1909 the averages have been 18,969 wage earners and $14,346,000 
annuel payroll. The peak was in 1919, with 26,296 wage earners and 
a payroll volume of $25,363,132. 

The heaviest demand for fertilizer comes in the planting season, 
and a large percentage of shipments are concentrated in a few Spring 
months. The seasonal peak has been growing more acute over a period of 
years. In 1919 the minimum monthly employment was 54.9 per cent of the 
maximum; and this has steadily declined until at the last Census of 
1933 it was only 32.8 -oer cent. The peak of employment occurs in March 
or April end the minimum employment is usually in June. 

Types of Plants 

The Industry as defined by the Code comprised several different 
types of plants, each of which had different problems. The smaller 
firms purchase all their materials and merely mix them. In numbers 
these constitute about 600 of the 800 odd plants engaged in the business. 
Appropriately 200 plants are engaged in the manufacture of superphos- 
phate, one of the constituent raw materials in most fertilizers. About 
100 of these plants manufacture the sulphuric acid necessary for their 
production. These superphosphate and acid plants reopiire a relatively 



i. . 

large capital investment, and;. the acid plants are rum continuously all 

Productive Capacity 

The farmer does not anticipate his fertilizer requirements by ad- 
vance purchases, because of lack of money, inadequate storage abace or 
fear of deterioration of the product. This increases the seasonality of 
production for the manufacturer, since he does not wish to carry heavy 
inventory and to speculate in the raw materials that constitute over 60 
per cent of his cost. Thus the dry mixing plants usually have a capac~ 
ity which will take care of the peak demand. Statements regarding the 
excoss' productive capacity of these plants and of the Industry, there- 
fore, should he subject to careful scrutiny. 

For firms which manufacture superphosphate productive capacity is 
largely a natter of sufficient capital and storage space, since sulphur- 
ic acid can be purchased in the open market • 

Principal Price Factors not Controlled by Code 

The predominant factors in the price of fertilizer were not con- 
trolled by the Fertilizer. Industry Code. » In 1934 raw materials repre- 
sented 62.5 per cent of the total cost of the manufacture of mixed 
fertilizer, and bags or containers represent an additional 7.5 per 
cent» The drop in fertilizer prices over a period of years has been due 
not so much to improvements in production or distribution as to varia- 
tions in the prices of these raw materials, resulting from their in- 
creased world output. 

The leading nations have sought to obtain national self-suffiency 
with reference to fertilizer materials, not only because of their war 
time V3.1ue for increasing crops with a smaller amount of labor, but also 
because the nitrogen materials the basis of explosives and of chemi- 
cal war fare . The United States , while formerly dependent upon foreign 
countries for potash and for a large percentage of its nitrogen needs, 
could today in an emergency supply* the entire requirements of the Ferti- 
lizer Industry with domestic production. This is due in large measure 
to the development of the processes for the fixation of atmospheric 
nitrogen and to the discovery of great potash deposits in New Mexico* 
We still impprt large tonnages of fertilizer materials* however, and 
their prices are set in world .markets, since there is no import duty* 

Interstate Aspects of the Fertilizer Industr y 

The distribution of fertilizer materials furnishes an excellent 
illustration of interstate commerce • The sources of these materials are 
highly concentrated geographically. Potash is either imported or comes 
from ITew Llesicp or California. Phosphate rock comes primarily from 
Florida, and to a lesser extent from Tennessee, and is made into super- 
phosphate "by using sulphuric acid, the sulphur' content of which is large- 
ly imported pyrites or is derived from the Texas or Louisiana deposits* 
These materials are distributed to fertilizer manufacturers, and through 
them in the form either of mixed fertilizers or- without mixing, to 
farmer consumers in practically every state of the Union. 



Impact of the Depression 

Competition for the farmers 1 fertilizer "business is always keen; 
but in years following a decline in agricultural income each producer 
of mixed fertilizer has "been tempted to utilize every method of competi- 
tion in the effort to maintain his volume of "business. This has produc- 
ed a state of competition from which so-called unfair trade practices 

Unfair Trade Practices 

I.Iany of these practices had to do with methods of price cutting, 
of which the most serious was perhaps the guaranteeing of prices against 
decline, not only as to a seller's own prices* but also as to those of 
competing producers. This was especially serious "because a large per** 
centage of fertilizer sales were made on a credit basis, due to the 
farmer 1 s inability to pay until he received the proceeds of the crop on 
which the fertilizer was used. The farmer's settlement at the end of the 
season was based upon the lowest price at which any producer had offered 
him that particular grade during the preceding season. Variations in 
quality were often ignored, and the sale of a very small tonnage at a 
low price late in the season, by some producer who had not been able to 
move his inventory, caused heavy losses to the Industry as a whole* 

In many instances retroactive settlements were made on cash sales, 
if at the end of the season prices had declined below those which a 
particular farmer had had to pay. Competition often resulted in the un- 
wise extension of credit to the farmer, and large Industry losses re- 
sulted* Price cutting by rebates and trucking allowances, or by offer- 
ing a multiplicity of grades which deviated only slightly from the stand- 
ard, were also extensively utilized as price cutting vehicles. 

Industry's Code Experience Prior to N.R.A. 

Industry had had three or four so-called codes of fair trade 
practices prior to N.R.A. The last of these codes had been approved 
by the Federal Trade Commission in 1929 and had been abandoned in 1932, 
because of the demoralized condition of the Industry. Due to the drop 
in the farmer's purchasing power the sales of fertilizer were only 4,400?- 
000 tons in 1932, as contrasted with 8,200,000 tons in 1930; and the 
resulting scramble for business led to 'whole sale violation of the code. 

La bor Conditions Prior to N.R.A • 

Up to the time of the N.R.A. the Industry had never given any con- 
sideration to rousing the level of competition as regards labor stand- 
ards. Lieasured by any standard wages were low, and working hours were 
abnormally long. Employees in many plants worked as long as 84 hours 
per week, with 50 hours the average in the busiest month of 1933. Some 
Southern plants paid as low as four or five cents an hour for common 
labor. The average wage from January to June, 1933, in the United States 
was 21 cents per hour, with common labor in dry mixing departments re- 
ceiving an average of 16.9 cents. 


In 1933, with" fertilizer selling at a <;<rice below the cost of pro- 
duction, the tonnage increased only about 400,000 tons, thus illustrating 
the inelasticity of the farrier's demand. The corporate income tax re- 
turns made to the Treasury Department show losses in excess of profits 
of $10,757,377 in 1931, $3,057,105 in. .1932, and $2,474,256 in 1933. 


The l\UH»Ao Fertilizer Cede contained -provisions designed to raise 
the level of competition "both as regards la.bor standards and as to the 
methods of doing "business* 

Labo r Provisions 

Labor, which represented only from five to eight per cent of the 
total cost of manufacturing mixed fertilizer, was not a serious cost 
factor. The Industry, therefore, readily adopted labor standards which, 
while not high compared with those of sore other industries, neverthe- 
less represented a marked advance over the abnormally low ones that had 
prevailed prior to the Code, Workers' were limited to a miximum of 40 
hours per week, with certain exceptions; and the minimum rates of wages 
were fixed at 25 cents per hour in the South, 35 cents in the ITorth ajid 
Middle ".est, and 40 cents on the Pacific Coast, 

Trade Practice Provisions 

As a base from which to measure orice cutting, the Industry had a 
clause prohibiting sales below cost except to meet competition. The 
most important provision of all, however, required the filing of open 
prices, with a ten-day waiting period before a revised schedule became 

Code Authority . 

The Code Authority was a body appointed by The National Fertilizer 
Association, a trade association judged by the N»B«£« to be truly repre- 
sentative of the Industry. The Code Authority a.nd many of those to whom 
they delegated authority were men experienced in administering this In- 
dustry* s previous codes of fair trade practices, as 'practices, as approv- 
ed ''oy the Federal Trade Commission© 

Code Com-pliance 

Ail excellent compliance record was achieved by the Code Authority, 
which handled 1334 cases of trade practice complaints and 90 cases of al- 
leged violations of the labor -provisions of the Code. Fewer than 20 of 
the trade practice complaints ?/ere referred to the 1T.R.A. 

Code Never Rep-oened for Amendment 

Several provisions which it would have been desirable in the public 
interest to include in the Fertilizer Code, to bring it into line with 
N.R.A. policies developed after the original approval, were never in- 
corporated, even though the Industry would not have objected to them. 



The difficulty lay in the fear of the Industry that a reopening of the 
Code might deprive the Industry of privileges already embodied in it, 
such as the ten-day waiting period on open price filing which was con- 
sidered to he essential for successful operation. 

The Code Contributed to the Indu s try Stability 

The Code was successful from the viewpoint of the Industry and con- 
tributed to its stability. Another factor which contributed to the im- 
proved Industry position was the sharp upturn in the farmer 1 s purchasing 
power that developed during the Code period. Other important factors 
were the removal of legal restrictions that had "been hindering the co- 
operative efforts of the Industry; the fact that the Code was well adapt- 
ed to the Industry 1 s needs, as a result of previous experienced with 
similar instruments; the trained personnel with knowledge of the Industry 
and with experience in administering codes; and the location of the 
executive offices of the trade association and of the Code Authority in 
Washington, where they could closely cooperate with N.R.A. 

Limitations of Existing Statistical Data 

This study has developed the fact that the existing statistical 
information is not adequate to determine accurately either what hap- 
pened to labor, the Industry and the consumer during the period through 
which the Code operated, or to determine what part of any change indi- 
cated, was due to the Code itself. 

Eor determining what happened to Labor we are dependent upon the 
Bureau of Labor Statistics, which compiles the only continuous series 
of labor data. This is based on a sample for one week of each month 
gathered from a limited number of firms and extrapolated to obtain esti- 
mates for the entire Industry. The figures are, therefore, only as ac- 
curate as the sample is representative of the Industry, as a whole. 
The results indicated are that the Code did definitely help labor. 

Labor T s Position Improved During the Code 

Under the Code, the first Spring or busy season of the year, when 
contrasted with the same period for the previous year showed an increase 
in hourly rates of 41.5 per cent. Weekly earnings increased 6.1$. The 
maximum hour provisions of the Code spread employment by 50 per cent, 
and purchasing power was increased by a 62 per cent gain in the Indus-. 
try*s payroll. In citing these effects on labor it is recognized that 
the rise of 13.6 per cent in the Industry 1 s production tonnage between 
1933 and 1934 caused by the increase in the farmer's income, and that 
the demand for fertilizer contributed to the labor gains. 

During the second year of code operation production made a further 
increase of 13.8 per cent. This is reflected in the comparative spring 
labor statistics, which show an increase in total man hours of 6.6 per 
cent. This did not result in spreading employment further, as the aver- 
age man hours per week increased 3.2 per cent and the number employed 
decreased 3.5 per cent, while average hourly wage rates decreased 3 per 
cent. The individual worker 1 s weekly pay envelope decreased four-tenths 
of one Tier cent. 


The Industry* s Improved Financial Positi on Duri ng th e Code 

The Industry improved its financial position during the code period. 
Cost studies "by The National Fertilizer Association indicate that the 
manufacturer received 34 per cent more for representative grades of ferti- 
lizer in 1934 than he had received in 1933© Of this gain in price 53. G 
per cent represented increased revenue to the manufacturer* The finan- 
cial statistics of income of the Industry from the Treasury Department 
for the code period are not yet available Current financial reports 
indicate that the Industry has come back remarkably during the two years 
of code operation* and has turned pre~code losses into profits. Figures 
for three of the largest companies show this trend; 

Net Profits Before Interest and Dividends 
(Fiscal Year ended June 30) 

Chemical Corporation 

International Agricultural American Agri- 
Corporation cultural Chemical 






492 , 377 










Consumer Position During Codal Period 

The aoove described stabilization of the Industry with increased 
profits and an improved position for Labor, was apparently effect with- 
out increasing the prices of fertilizer to the farmer (as indicated by 
the available statistics) any more than the increase -in prices in gen- 
eral, and only to a fraction of the increase in the prices" received by 
the farmer for the things which he sells© 

•The inadequacy of statistics ..for determining exactly what happened 
to the prices of fertilizer to the f armer during the period for which 
the Code operated is primarily due to the lack of accurate information 
as to what was. really paid for fertilizer in pre-code years, because of 
price cutting and rebating that were . then common practices© Such figures 
as are available were obtained by the Bureau of Agricultural Economics 
from a questionnaire sent to dealers. They represent the prices that the 
latter say they customarily charged farmers for particular grades of 
fertilizer© No actual canvass of retail sales prices is available© 

The index thus obtained indicates that in i.larch of 1934 and 1935 
prices were only 14 and 15 per cent, respectively, above the comparative 
period of the ure-code year 1933© In that year, according to The Nation- 
al Fertilizer Association's cost survey, sales prices were below the 
cost of manufacture© This survey was undertaken at the request of 
N.R©A., so that farmers or their representatives who complained of 
prices might have the facts on cost of production. Considering that 
some 50,000 agents and dealers are engaged in the distribution of 

n i-7 a r* 


fertilizer to 2,250,000 farmers, comparatively few complaints of the 
prices charged were made during the period of Code operation* 


The Fertilizer Industry has not had a "busy season since the Schech- 
ter decision, which came at the period of minimum demand for fertilizer* 
Nevertheless, in anticipation of the intensive selling season which will 
"begin in January, 1936, the Industry has exerted every effort to con-, 
solidate the gains which it made under the N.R.A. , and to prevent the 
recurrence of the chaotic conditions that have prevailed periodically* 

Appeals were made to preserve Code standards; and the Industry was 
one of the first to cooperate with the Government in submitting a Volun- 
tary Code, containing Doth fair trade practice and labor provisions* 

Evidence presented at the hearings and at the Annual Southern Con- 
vention in November, 1935, indicates that some companies are deviating 
sharply from code practice, and that they have so lowered labor stand- 
ards that their labor cost per ton has "been cut in half. 

" The Industry is one in which some advantages accrue to "both large 
scale and small scale producers. With a large number of firms ever 
ready to iipset the price structure, it seems as though history were 
about to repeat itself* Previous codes have worked fairly well during 
the first year, but no so effectively in the second year; and then, as 
the volume of business has declined, the law of the jungle has again 
prevailed. Special legislation may yet be needed to save the Industry. 


The N.R*A* experience with the Code for the Fertilizer Industry 
demonstrated that such industrial legislation is practicable under 
certain conditions. This Industry was sufficiently well organized and 
experienced to know its own problems, and which code provisions would 
help to solve them. It had available personnel experienced in admin- 
istering codes, so that the administrative work was handled with a 
minimum of Governmental assistance* This Code contributed to the 
stabilization of the Industry, the spread of employment and the increase 
of wages, and the placing of the Industry on a profitable basis with a 
relatively moderate increase in prices to the consumer. 


Table of Content s 


I. The Code Structure 

II. Scope of the Report 

III. Organization of the Wholesaling and Processing Industries 
IV. Participation of Wholesalers and Processors in the Fisheries 

V. Specialized Sub industries 

VI» Detailed Classifications of the Sub industries and Codes 

VII. Perishability of Products and Trade Organization 

VIII, Distribution of Nonperishable Products 

IX. P.etail Distribution of Pishery Products 

X. Exclusion of Certain G-rcups from the Pishery Code Industry 

XI. The Pactor of Interstate Trade 

A. In the East 

B. On the Pacific Coast 

XII. Trade Organizations in the Pishery Industry 

XIII. Advantage of a Code System with Respect to Txe-dB Organization 

XIV. Labor Organization in the Pishery Industry 

XV. Organization in the Processing and Wholesaling Industries 

XVI. Labor Activity in the Fisheries Proper 


I. The G-ross Volume of Business 

II. The Primary Production Since 1929 

III. The Outstanding Species 
IV. The Export Trade 

V. The Competition of Imports 

VI. The Per Capita Demand for Pishery Products 


„_ - 

— 58— 

VII. Decline in Demand in the Nineteenth Century 

VIII. Unfavorable Competitive Position and Possible Remedies 

IX. The Consumer Demand and the Code Program 

X. The Natural Supply and the Problem of Conservation 

XI. The Conservation Problem and the Codes 


I, Prices 

A. To Primary Producers 
3. To Wholesalers 
C. To Processors 

II. The Price Deflation and the Financial Position of Pishing Enter- 

III. Relationship of Pish and Meat Prices 
A. Mackerel and Meat Prices 

IV. Bearing of the Study on the Control of Fishery Prices 

V. The Spread Between Prices to Producers and to Consumers 

VI. Relative Absence of Monopolistic Practices 


I, The Vessel, Boat and Shore Fisheries 

II. The Number and Ownership of Fishing Vessels 

III. Life and Age of Fishing Vessels 

IV. Number and Ownership of Fishing Boats 

V. Size of Fishing Enterprises 

VI. Wholesaling and Processing Establishments 


I. The Primary Producing Industry 

II. Regular and Causual Fishermen 

III. Characteristics of the Personnel of the Fisheries 

IV. Size of Fishing Crews 

Vo Productivity of Fishing Labor 


VI. Periods of Active Employment in the Fisheries 
VII. Supplementary Employment and Earnings 
VIII. Employment in the Wholesaling and Processing Industries 
IX. Seasonality of Employment 
X. Total Personnel of the Fishery Industry 

I. Hours in the Primary Producing Industry 
II. Hours in the Processing and Whole sal ing- Industries 
III. Hours in the Canning Industries 
IV. Hours in the Preparing and Wholesaling Trades 
V. Hours in the Canned Salmon Industry 
VI. Hours in the California Sardine Industry 
VII. Hours in the Fresh Oyster Industry 

I. Modes of Compensating Fishermen - The Share System 
II. The Share System in the Fisheries 
III. The Employee Status in the Fisheries 

IV. Earnings of Fishermen 

A. In 1933 

B. In 1929 . 

C. In 1934 

V. Changes in Earnings from Wages 

VI. Fishermen's Earnings and the Business Cycle 

VII. Abuses in the Administration of Lays 

VIII. The Fishermen Employed "by Alaska Salmon Canneries 

IX. The Total Volume of Compensation in the Fisheries 

X. Pre-Code Wages in the Wholesaling and Processing Divisions 

XI. Wage Voluem of the Wholesaling and Processing Industries 




I. The National Fishery Code 

II, Administrative Bodies Under the National Code 

III. Defects of the National Code Set- Up 

IV. What the National Code Program Should Have Been 

V. Development of the Supplementary Codes 

A. Causes of the Delay in Writing Supplementary Codes 

B. The problem of Supplementary Code Areas 

VI. Office Memorandum No. 228 and the fishery Codes . 

VII. The Delay in Writing Codes for the Fisheries 

VIII. A Practicable System of Fishery Codes 

IX. A Program for the Preparing and Wholesaling Trades 


I. The Problem of Code Finance 

II. Finances of the National Code Authority 

III. Collections and Expenditures of the Committees 

IV. The Compliance Problem in General 

V. Code Enforcement Regarded as a Government Responsibility 

VI. Actual Developments with Respect to Compliance 

VII. Exceptional Cases of More Effective Administration 

VIII, Few Cases of Highhanded Action ''oy Code Bodies 

IX. The Code Bodies and the Collection of Statistics 


I. Restriction of Hours 

A. In the Preparing and Wholesaling Trades 
33. In the Canning Industries 

C. In the Canned Salmon Code 

II. The Aggregate Spread of Employment in the Fishery Industry 
III. Compliance with the Maximum Hours Provisions 



I. The Minimum Wage Program 

II. The Wage Fisherman 

III. Wages in the Oyster Fishery 

IV. Fishermen's Wages on the Great Lakes 

V. Wages in the Menhaden Fishery 

VI. Minimum Wages in the Preparing and Wholesaling Trades 

VII. The Wages of Oyster Smickers and Crah Pickers 

VIII. The Minimum Wages of the California Sardine Industry 

IX. Minimum Wages in the Canned Salmon Industry 

X. The Minimum Wages of Employee Fishermen 

XI. Wages in the Hew England Sardine Industry 

XII. Compliance with the Minimum Wage Provisions 

XIII. The Effect of the Minimum Wage Provisions 


I. General Characteristics 

II. Classification of Provisions Affecting Prices 

III. Prohibition of Destructive price Cutting 
IV. The Filing of Open Prices 

V. Prohibition of Sales Below Individual Cost 

VI. Effect of the Sales Below Cost Provisions 

VII. Minimum Costs and Prices in Emergencies 

VIII. The Prohibition and Regulation of Consignment Sales 
IX. Peculiar Practices in Handling Consignments 

X. Effect of Consignment Selling on Prices 

XI. Effect of the Provisions Relating to Consignments 


I. The Prohibition of Discriminatory Prices 


II. Regulation of Credit Terms 

III. Bases of Price Quotations and Settlements 

IV. Allowances on Claims 

V. The Diversion of Brokerage 

VI. provisions for the Benefit of Primary Producers 

VII. Payment for Purchases from Fishermen 

VIII. Provisions Relating to A'buses in the Administration of Lays 

IX. Provisions Relating to the Competition of Imports 

X. Complaints and proceeding with Respect to Import Competition 

XI. Conservation Provisions in the Fishery Codes 

XII. Provisions Designed to Establish Grades or Standards 

XIII. Minor Trade practice Provisions 


I. The Mackerel Season and the Ports of Landing 

II. The Fresh, Freezing and Salting Markets and the Import Trade 

III. The Volume of the Catch 

IV. The Price of Mackerel to the Fishermen 

V. The Costs of the Mackerel Fleet 

VI. Earnings of Mackerel Fishermen in 1932 

VII. The Genesis of the Production Control Provision 

VIII. The Purposes and Methods of the Control 

IX. The Control and the Quotas in 1934 

X. The Application for an Emergency Price and the Control 

XI. The Results of the Control 

XII. The Control and other Price- Governing Factors 

XIII. Statistical Evidence of Price Relationships 

XIV. Conclusion with Regard to the Production Control 





Pre lim inary Summn ry of Find i ngs 

The Industry and The Co d es. The Fishery Industry was taken, for the pur- 
pose of the present study, as including not only the primary producing 
industry, or the fisheries in the ordinary sense, hut also the whole- 
sale trades handling fish and shellfish and the industries engaged in 
processing fishery products • 

The original plan was to have a single master code for the Industry 
as thus defined, with .supplementary codes for a considerable list of 
subdivisions. This plan, however, was objected to in some quarters. 
Ultimately, the Canned Salmon Industry was given an independent code, 
and several other canning groups were placed under the Canning Code. 

Production of the Indus try. The gross volume of sales of the Fishery 
Industry amounted to about $500,000,000 in 1929, to about $250,000,000 
in 1933, and to about $325,000,000' in 1934, 

From 1929 to 1933 the value of the fishery catch as landed fell off 
by about 51 percent, and the quantity by about 19 percent. The latter 
decline was substantial for a class of staple foodstuffs, but the great- 
er part of the heavy' drop in dollar volume was due to the fall in the 
unit price. The latter averaged about 35 percent, from 1929 to 1933, 
for the whole catch, but in the case of a majority of the most important 
species of food fish it ran from 40 to 60 percent. 

This heavy deflation did serious damage to the finances of a very 
large proportion of the enterprises composing the industry. 

Prices of Fishery Products . Fluctuations in the prices of fishery pro- 
ducts are closely tied up with the movement of the prices of meat. The 
competitive relationship of the two classes. of protein foods in unfavor- 
able to the Fishery Industry when price movements are adverse. The per 
capita demand for fishery products in the United States is much below 
that of most other advanced countries, and is lower now than it was 50 
years ago. The development of this demand is one great problem of the 

In their original form fish and shellfish are highly perishable, 
and the cost of shipping them increases rapidly with the distance. There 
has been an improvement in the methods of making such shipments in the 
last 15 years; but the further development of these facilities constitu- 
tes another major problem. 

The writing of the master code for the Fishery Industry, usually re- 
ferred to as the National Fishery Code was much delayed vhile all the 
codes for food-producing industries were in the jurisdiction of the 
Agricultural Adjustment Administration. 

The Code Structure . The plan of putting the whole industry under a 
master code as a first step had important advantages; but the details of 
the set-up sdopted involved serious errors of judgment. The National 
Fisheries Association, which was empowered to select the National Code 


Authority, was not sufficiently representative for the purpose. The Code 
Authority actually established did not properly represent large parts of 
the industry. It was consequently unpopular in many quarters. 

The Code Authority was entirely dependent for its income on 25 per- 
cent of an assessment of one-tenth of one percent of the preceding year's 
sales, which was to he collected by the Executive Committees established 
to administer the Code in the various subdivisions. The assessment was 
moderate, but under the circumstances difficult to collect. The nation- 
al Code Authority, moreover, adopted in the beginning a too grandiose 
program of spending; and when this had to be cut down its prestige suffer- 

There was much delay in establishing the subordinate Executive Com- 
mittees and in writing supplementary codes. This was dueprimarily to 
the large size and arbitrary character of the code areas insisted on by 
the N.R.A. , and to the effect of tine promulgation of Office Memorandum 
228, which greatly restricted the types of trade practice provisions for 
the control of prices which the Administration was prepared to approve. 
Supplementary codes were put into effect for all the important process- 
ing industries, but not for several of the regional preparing and whole- 
saling trades. The standard procedure in code-writing was peculiarly 
ill-fitted to the special conditions of the fishing industry proper; and 
only one supplementary code — for the Atlantic Mackerel Fishery — ■ was 
approved for any part of the latter. 

Administration of the Codes . The conditions governing the administra- 
tion of Fishery Codes were very difficult. There had been little pre- 
vious organization in the industry. The number of members was large and 
the average size of the units was small. As a result the psychology of 
the members was individualistic. They were not accustomed to paying dues 
for common purposes; and most of them, at the time the codes were ap- 
proved, were in very low financial water. The artificially large areas 
to which many of the supplementary codes applied, moreover, brough up 
problems of internal competition and jealousies. The collection of 
assessments was very difficult. Only two or three of the Fishery Code 
bodies ever took in as much as 25 percent of their estimated income. 
Both funds and staff were throughout inadequate. 

The Compliance Situation . Under these adverse conditions the code bodies 
began with conscientious efforts to obtain compliance. Their habits of 
though, however, led them to regard the enforcement of the codes as main- 
ly a responsibility of the Government. When the latter proved unready 
to shoulder this responsibility, the code bodies, generally speaking, 
threw up their hands with respect to compliance. 

In contrast with this general situation a few of the fishery codes, 
chiefly among those for the processing industries, were administered with 
relative efficiency. 

Perso nnel of the Industry . In 1929 the Fishery Industry had a total 
personnel of from 200,000 to 210,000. Of these 120,000 to 125,000 were 
engaged in the fisheries proper. Of the latter, 60 percent were small 
entrepreneurs, and most of the remainder were employees only in a quali- 
fied sense. Three quarters of all fishermen worked on a share basis, 

and only 20 percent on wages. The cecline in the number of fishermen 


from 1929 to 1933 was ■unimportant,. 

In the processing and wholesaling divisions the falling-off in em- 
ployment was greater, "but still moderate in comparison with most other 

Hours of Labor and their Rest rictio n, Unusual conditions made it seem 
impracticable to apply the standard- program for spreading employment by 
restricting hours of labor to the fishing industry proper, or to the 
Canned Salmon Industry. The two together had 68 percent of the total 

In the remainder of the industry, with 32 percent of the personnel, 
the fluctuations in working hours were so complex and extreme as to make 
restriction very difficult. These industries, moreover, were disposed 
to look upon the effort to spread employment in their particular case as 
academic and superfluous. It consequently proved difficult to agree on 
maximum hours. Those adopted were only moderately satisfactory, and the 
spread of employment that they produced did not amount to very much. 

Earnings and Minimum T/a ; ^es . Share fishermen, with about 45 percent of 
the total personnel of the industry, were excepted from the benefits of 
the minimum wage program. This was probably a defect in the Code, though 
the practical problem of giving this exceptional class the benefit of a 
guarantee of minimum earnings was admittedly difficult. 

As a result of the deflation in the prices of fish and shellfish 
after 1929, the average earnings of share fishermen in 1933 had fallen 
off 57 percent and were only about $640 per man forthe year. The sub- 
sequent price recovery, however, raised this average from 1933 to 1934 
by 51 percent. This extreme fluctuation appears abnormal and demoral- 
izing. The earnings of wage fishermen did not fall off so much, but even 
lower in 1933. 

Uith striking exceptions in a very few cases, wages in other branches 
of the Fishery Industry adopted were at least tolerable, and in most 
instances very fair. These industries, moreover, were generally in 
sympathy with the minimum wage program, and rates at least up to the 
general code standard were agreed upon without much difficulty. 

The contract labor system in salmon canneries in Alaska was abolish- 
ed, and a substantial increase in wages obtained for the workers concern- 
ed. There was a peculiarly difficult problem in the case of oyster 
shuckers and crab-meat pickers in the Chesapeake Bay area, which was not 

The Fishery Code bodies were not in a position to do much to enforce 
the labor provisions. The evidence is, however, that they were fairly 
well complied with without much systematic effort at enforcement. 

Trade Practice Provi sions_oj|__the__Codes> The sponsors of the Fishery 
Codes were primarily interested in trade practice provisions designed 
to maintain or regulate prices. Some of them desired such provisions in 
crude and drastic forms which the Administration c ould not approve. 



The Atlantic Mackerel Fishing Code contained a provision for the 
control of the catch. This was in operation through the fishing season 
of 1934; "but during the latter half of this period the quota was so high 
that the control amounted to little. Prior to the raising of the quota 
to this level the control had proved fairly workable. It is probable, 
however, that because of the close tie-up between fish and meat prices 
the control of the production of single species of fish can not do much 
to raise prices to really remunerative levels. 

Price-filing provisions worked fairly well in the fishery process- 
ing codes, but less so in the wholesaling codes. Provisions prohibiting 
sales below individual cost amounted to little, since a uniform cost 
system to implement a provision of the kind was approved in one case 
only. Similarly, no use was made in practice of provisions permitting 
the establishment of minimum prices in emergencies. 

The sponsors of the codes attached importance to a variety of pro- 
visions regulating consignment shipments, limiting credit terms and 
allowances on claims by customers, and prohibiting the diversion of 
brokerage to the latter. The conditions governing the enforcement of 
these lorovisions were too adverse to permit any of them to produce much 

Effects of the Codes and Needs of the Future . The basic potential ad- 
vantage which the code system promised for the Pishing Industry lay in 
the fact that it provided for the first time a framework of industrial 
organization. As things turned out, the hope that such an organization 
would develop effectively was not realized. In time, however, the codes 
should have encouraged the habit of organization, and should have educat- 
ed the members of the industry in grappling with their problems in com- 
mon. The need of so doing still exists. 

Research work on the Fishery Industry is in a very backward state, 
and there is a crying need for additional facilities to carry it on. 


Table of Oonte nts 


I. G-Jeneral Characteristics 

A# Products of the Industry 

Ba Code Definitions 

C# Divisions of the Industry 

la Private or Home Millinery 

2. Custom Millinery 

3. The Custom Millinery Code 
4a Factory Millinery 

Da Production of Millinery on Knitting Machines 
Ea Production of Millinery by Other Industries 

1« Infants 1 and Children's Wear Industry 

2 a Cap and Cloth Hat Industry 

3. Other Industries 
Pa The Absence of Contracting 
G-. Interstate Commerce 
H. Location of the Industry 
J. Size of Establishment 
K« of Entry; Consequences 
La Competitions in the Industry 

1« The Control of Competition 

(a) By Combinations 

(b) By Trade Associations 

(c) By Trade Unions 

(d) By the Millinery Code 

(e) By a Voluntary Code 
Ma Mortality in the Industry 

la Extent of Mortality 

2. Causes of High Mortality Rate 

3. Consequences of High Mortality Rate 
4a Reducing the Mortality Rate 

Na Manufacturer Education Under the Code 
0. Sales and Price Trends 

la Extent and Causes of Decline 

2. Attempts to Control Prices Under Code 

3. Price Stabilization through Stabilization of Hours and Wages 

II. The Distribution of Millinery 
A. Retail Outlets 
Ba Salesmen in the Industry 
Ca Buying Syndicates and Leased Departments 

1. Geographical Distribution of Leased Departments 

2. Extent of Leasing Millinery Departments 
Da Code Provisions Affecting Distribution 

1. "Standard" Trade Practice Provisions 

2. Advertising Allowances 

3. Terms and Discounts 
4a Return of Merchandise 

5, Other Trade Practice Provisions 



III. The Importation of Haw Materials 

A. Causes for Volume of Imports 

B* Limitations of Survey 

C » In clu s t r y Ir e nd s 

D. Character and Volume of Imworts 

1. fabrics 

(a) Hats and Ha,t Materials 

2. 'Trimmings 

E. Conclusions 

IV. Trade Associations in the millinery Industry 

A. national Millinery Council 

B. Women's Headwear Group, Inc. 

C. Hew England Millinery Jobbers 1 and manufacturers 1 Association 
Dm Philadelphia Millinery Association 

E. millinery Manufacturers 1 and Jobbers 1 Association of Los Angeles 

F. national Association of Ladies T Hatters, Inc. 
&• Eastern Millinery- Association 

H. Seattle Millinery Manufacturers* Association 

J, Southern Millinery Manufacturers 1 Association 

K# manufacturers* and Wholesaler s 1 Association of San Francisco; 

Millinery Division 

L. Midwestern Millinery Association 

M. Dallas millinery Council 

IT* Associated Millinery Industries of St. Louis 

0* millinery Manufacturers of New Jersey, Inc. 

P. Cleveland Ladies 1 Hat Manufacturers'' Association 

Q. Association of Millinery Manufacturers of Chicago 

R. Wisconsin Millinery Manufacturers' Association 

S. Millinery Headwear Association, Inc« 

T. Women* s Headwear Associa/tion, Inc. 

U. Associated Millinery Industries of Kansas City 

V. Detroit and Buffalo Millinery Manufacturers 1 Association 

T7» Eastern Headwear Group 

X. national Millinery Manufacturers 1 - Association 


I. Causes of Seasonal Fluctuations 

At, General Factors 

B f Bujdng Habits of Consumers 

C. The Style Factor 

D. The Oversurply of Labor 

E. Decentralization of Industry 

F. Growth of Syndicate Distribution 

II. Extent of Seasonal Fluctuations 

A. Degree of Seasonality 

B. Relative Importance of Seasons 

C. Tendency Toward Increased Seasonality 

D» Influence of Long-Term Trend and Seasonality 

E. Causes for Increasing Seasonality 

P. Differences in Seasonality "between Markets 

' G. Comparison with Related Industries 


-69- • 

III. Effects of Seasonal Fluctuations 
A. Periodic Unemployment 
B* Decreased Annual Wages 

C. Collateral Employments 

D. Part-Time Employment 
E» Employee Morale 

IV. Reducing Seasonality 

A. Influence of Organized Labor 

B. Influence of the Code 

C. The "Seligman Proposals" 

D. The Program of the Code Authority 


I. The Influence of Style 

A. The Significance of Style 

B. The Universality of Style 

C. Causes of Universality 

!• Growth of National Wealth 

2# Increase of Leisure 

3. Extension of Education 
4« Reduction of Prices 

5. Commercial Promotion 

D. Style vsc Utility 

E. The Psychology of Fashion 

1. A Phenomenon of Social Psychology 

2. Psychological Elements and Influences 

F. Relation of Producers to Style Trends 
G-. Forecasting Trends in Consumer Demand 

1. Need for Improvement in Forecasting Technique 
H. Causes of Fashion Movements '■ 

1. Dominating Ideals 5 Events, Groups, etc. 
J. Paris as the Style Center 

1. Location 

2o Force of Tradition 

3 ? Paris an Art Center 

4. An Industrial Center 

5. Other Factors 

6* Paris vs. New York 

K. The Economic Consequences of Style 

!• Location of the Industry 

2. Ethnical Characteristics of Labor 

3. Unionization 

4. Type of Productive Organization 

5. Small Scale Unit 
6 # Other Consequences 

II. Style Piracy 

A. The Nature of Piracy 

B. Methods of the Copyist 

C. Importance of the Question 

D. The Apologists of Piracy 

E. The Debate on Control 

F. The Ethics of the Case 



G-. Effects of Control 

1* On Rapidity of Style Creation 

2» On Consumer Demand and Industry Volume 

3# On Industrial Mortality 

4. On Obsolescence of Merchandise 

5# Arguements of Opponents of Control 

6, Conclusions 

H. The Consumer Interest 

1« Protection of Consumer's Investment in Style 

2% Effect of Piracy on Price 

3. Effect of Piracy on Quality 

4» Arguments of Copyists 
J. Is Control Monopolistic 
K. The Administrative Problem 

It Difficulties of Administration 

2» Experience in Other Countries 
' 3* Experience in Other American Industries 
L. Conclusions 

III. The Control of Piracy; Inadequacy of Existing Law 

A. Protection under Old Common Law 

B. Protection under Doctrine of Unfair Competition 

C. Federal Trade Commission Act; Unfair Competition 

D. Trade Practice Conferences 

E. Design Patent Laws 
lm Copyright Laws 

G-. The National Industrial Recovery Act 
H» Conclusions 

IVt Efforts to Control Piracy in the Millinery Industry 

A. Through Code Action 

1. Division of Code Authority on question of Control 

2. Original Proposals of Proponent Association 

3. Style Piracy Provision of Approved Code 

4. Action of Code Authority 

5 9 Report of Code Authority Style Piracy Committee 
6., Style Piracy Provision of Amended Code 

7. Failure of Code Authority to Deal with Problem 

B. The Millinery Quality Guild 

C. Conclusions 

I« Scope of Labor Study 

II. Arbitration 

A. Adjustment of Disputes in the Millinery Industry 

1. Historical Sketch 

2. Methods of Settling Disputes 

(a) The Millinery Adjustment Board for New York City 
3* Types of Cases Handled by Adjustment Board 

B. Arbitration in the Cap Industry 

C. Arbitration in the Hat Industry 

D. Arbitration in the Millinery Industry Outside of New York 



1. The Chicago Market 

2. The St. Louis Market 

3. The Philadelphia Market 

4. The Cleveland Market 

5. The Milwaukee Market 

III. Unemployment Insurance in the Cap Industry 
A • B a ckgr ound 

1« Need for Protection Against Unemployment 

2. Early Proposals 

3. The 1923 Convention 

4. Introduction of Unemployment Insurance 

B. Unemployment Insurance in St. Paul 

C. Unemployment Insurance in New York 
1 • Background 

2. Source of Fund 

3. Definition of Unemployment 

4. Eligibility for Benefit ' 

5. Scale and Duration of Benefit 
5, Termination of Plan 

7. Administration 

8. Collections of Contributions 
9« Payment of Benefits 

10, Settlement of Grievances 

D. Operative Experience in New York City 

1. The Fund 

2. Benefit Payments 

3. Distribution of Benefit Payments 

4. Administrative Cost and Procedure 

IV. Unemployment Insurance in the Hat Industry 
A. Background 
3. Plan of Local No. 45 

1. Source of Funds 

2. Definition of Unemployment 

3. Eligibility for Benefit 

4. Scale and Duration of Benefits 

5. Administration 

6« Payment of Benefit 

7. Administrative Body' 

8. Appeal 

9. Changes in the Plan 
10. Operative Experience 

C. Plan of Local No^. 3 

1. Source of Funds 

2. Definition' of Unemployment 

3. Eligibility for Benefit 

4. Scale and Duration of Benefit 

5. Administration 

6. Payment of Benefit 

7. Administrative Body 

8. Appeal 

9. Changes in the Plan 
10. Operative Experience 



V. Extension of Unionization under NRA 
A, Milwaukee Market 
B« Log Angeles Market 

C. Kansas City Market 
L # Boston Market 

E» San Francisco Market 

VI. Attitude of Labor Toward Voluntary Code 

I« Development of the Classified Wage Provision 

A. Pre-Hearing Proposals 

B. The Public Hearing 

If Opposition to Proposals of Sponsors 

2. Rival Proposals 

3« Industry Alignments 
C» Post-Hearing Conferences 

D. The "Seni-Final Draft" 

E. Impasse 

F. Breaking of the Impasse 

1 # Rapid Growth of Unionization 
2% New Industry Alignments 

3. New Proposals 

G-. The New York Conferences 

!• Revised Proposals 

2 9 Acceptance of Revised Proposals by Deputy 

3 # Further Conferences 
H. Securing Majority Assent to Classification 
J. Last Moment Objections 
Km Final Approval 

II # Objectives of Classification; Protection of Earnings 
A. Types of Devices Dealing with Wages above Minimum 
B # Shortcomings of the "Equitable Readjustment" Type 

C. Extent of Use of Wage Schedules 

D. Advantages of Wage Schedules 

E. Two-Fold Objective of Classification 

F # Original Position of Code Proponents on Classifications 
G-» Position of Labor and Unionized Markets 
llm Conclusions 

1« Inadequacy of a Simple Minimum 

2, Wage Increases under Classification 

III* Objectives of Classification; Equalization of Competitive Labor 


A. Importance of the Question 

B» Position of Advocates of Classification 
!• Inadequacy of a Simple Minimum 
2. Trend of Business toward Low Wage Markets 
3» Necessity for Classification 

4. Argument for a "Protective Wage" 



C. Position of Opponents of Classification 

1. Denial of Unequal Lao or Costs 

2. Denial of Theory of Equalization of Labor Costs 

D. Conclusions 

1. Instability arising from Unequal Labor Costs 
2 9 Validity of Equalization Theory 

3. Stabilization Achieved through Classification 

IV. The Pre-Re qui sites of Classification 

A. High Degree of Unionization 

B. Craft System of Production 

C. Standardized Productive Processes 

D. Experience in Related .Industries 
1. Custom Millinery 

.. 2o .Knitted Headwear 

3> Hat Industry 

V, Safeguards on Classification 
(Hot yet written) 


I. Creation of the Board 

A. Personnel of the Board 

B. Early Administrative Procedure 

II. Problems Reviewed by Board - Original Code 

A. The Need for a Board 

B. Scope of Eirst Hearing 

III. The Board as a Conciliating Factor 

IV. Basis for Special Board Decisions 

A. Employment of Industrial Experts 
B* Competitive Costs 

C. Relations with Labor 

D. Methods of Distribution 

E. Pertinent State Laws 

E. Prevailing Hours Prior to Code 
G-. Methods of Wage Payment 
H. Methods of Production 

V. The Board under the Amended Code 

A. Expanded Powers 

B. Administrative Procedure 

C. Exemptions Recommended by Board and Approved by Administration 

D. Requests for Exemptions Denied by Board 
S. The Viewpoint of the Board 

VI. Important Cases Handled by Board 

A. The Chicago Situation 

B. The Dallas Situation 

C. Other Cases 



VII. Attitude of Interested Parties toward Board 

A. Members of Industry 

B. National Recovery Administration 

C. Labor 

VIII. Critical Evaluation 

A. Legislative Functions 

B. Influence on Compliance 

C. Effect of Board Decisions on Amended Code 

D. Safeguarding Interests of the Employee 

E. Summary of Market Applications Handled by Board 

F. General Policies of Board 

G. Relation of Board to Code Authority 

H. Summary of Individual Applications Handled by Board 


I. Overlrpping Code Definitions 

A. Under Original Code 

B. Under Amended Code 

C. Legal Aspects of the Code Problem 

II. Nature of the Underlying Problem 

III. Recommendations 


I. Statistics of the Hat Industry 

II. The Genesis of Minimum Averages 

III. Effect of Minimum Averages 



A. The Industry 

B. Sources of Information 

C. Trends in Business Volume 

D. Distribution of Sales according to areas in which Products 
are Held 

E. Distribution by Type of Outlet 

F. Production of Various Types of Caps 

G. Total Cost (Excluding overhead) 
H. Material Costs 

J. Direct Labor Costs 

K. Labor Costs for Individual Operations 

L • Mark-Up 

M. Selling and Freight Costs 

N« Sex of Employees 

0. Sectionalization of Shops 

P. Wage Rates, Earnings and Employment 



Preliminary Summary of Findings 

Divisions of the Industry 

The Headwear Industries are divided into three principal "branches, 
millinery manufacturing, men ! s hat manufacturing, and cap and cloth hat 
manufacturingc Each of these principal "branches may he further sub- 
divided J, according to type of product,, method of production, and method 
of distribution. 

The millinery "branch is composed of four segments, namely, private 
or home millinery, custom millinery, factory millinery, and millinery 
produced on knitting machines. These four segments represent in a re- 
markable manner the complete story of the evolution of an industry from 
its earliest "beginning to the highest stage of mass production. The 
men ! s hat "branch is composed of three segments, - in the order of their 
importance, fur-felt, stra?7, and wool felt. The cap and cloth hat 
"branch of the Headwear Industries, in its turn, is composed of a number 
cf segments, chief among which are golf caps and shop caps. 

While each of these three main "branches produces' a distinctive 
product j and while each presents a variety of conditions and problems 
peculiar to itself, all of them have much in common and may for prac- 
tical purposes "be considered a single industry, the Headwear Industry* 

Importance of the Industry 

The importance of the Headwear Industry may "be "better appreciated 
when it is realized that it accounts for the production of practically 
100 per cent of all headwear, of whatsoever type, form, or style, used 
"by the 120 9 000,000 men, women, and children of the United States. The 
only headwear not produced "by this industry is the comparatively insig- 
nificant quantity imported from other countries or produced "by related 
approved industries. 

In 1929 this Industry produced products to the value of approx- 
imately $361,000,000, not including the production of the home, custom, 
and knitted segments of the millinery "branch, for which no data is 
available. Conservatively, however, the value of products for these 
latter industries would "be at least $75,000,000, thus making an approx- 
imate grand total of $436,000,000. Subsequent references to the 
"millinery "branch" in this summary will concern the factory segment 

Of this total, the millinery "branch accounted for $196,000,000, 
the men ! s hat "branch for $130,000,000, and the cap and cloth hat branch 
for $35,000,000. During the same year employment was given to 32.206 
workers in the millinery branch, 21,947 in the men's hat branch, and 
5 a 826 in the cap and cloth hat branch or to a total of 59,979. Total 
wages paid in 1929, for all branches, amounted to approximately 



Because of the nature of the product the manufacture of most types 
of headwear is essentially a manual process. This is particularly true 
of the manufacture of millinery, somewhat less true of caps and cloth 
hats, and least true of men's hats, although even in the latter instance 
a great amount of purely hard labor is required. The principal mechani- 
cal equipment used consists of the sewing machine and various types of 
"blocking" -machines. The principal types of raw materials used are various 
faeries, hatters* fur, wool fibres (for the making of wool felt), straw 
and various types of trimmings. The total value of raw materials used. ; 
in 1929 amounted to approximately $150,000,000, of which about one-third 
was imported from abroad. 

Types of Establishment s 

The Headwear Industry consists of a large number of small establish- 
ments scattered throughout the country. In* 1929 there were 1,293 es- 
tablishments in the millinery branch, employing an average of 25 workers 
each; 223 establishments in the men's hat branch, employing, an average 
of 98 workers each; and 740 -establishments in the cap and cloth hat .. ■ 

branch, employing an average of 8 workers each. 

■ -\ 

Millinery t is produced in 26 different states, but 65.2 per cent of 
the total in 1934, was produced in New York State. The. States of New 
York, Illinois, New Jersey, Missouri,' Massachusetts, and California 
account together for 90 per cent of all domestic production. In the case 
of men's hats, production is carried on in 23 different States, although 
in 1929 39.2 per cent of all felt hats were produced in Connecticut and 
21.4 per cent in New York State; and 43.6 per cent, of all straw hats were 
produced in New York State and 20.3 in Missouri. In 1929 40.5 per cent 
of the output of the cap and cloth hat branch was produced in New York 
State, although 26 States contribute ■ to the total output. 

The products of the Headwear Industry, however, are consumed in 
every State, roughly in proportion to population.'-' On this basis, for 
instance, New York State would consume only 10.2 per cent of all millin- 
ery produced there. The same condition holds true, to a varying extent, 
for all other branches of the industry. 

As a general rule all markets ship throughout the country. This is •■.; 
especially true of the larger markets, but even the smallest, as far as : 
can be determined, ship beyond, the confines of their own states. Local 
markets are competed for by manufacturers throughout the country as well 
as by those in the same- state, and there is a multitude of evidence to 
indicate that depressed.; labor conditions in one market seriously inter- 
fere with the free flow qf -interstate commerce. ., 

Distribution of Millinery 

The products of the Headwear Industry are marketed by various methods* 
Some manufacturers distribute entirely through jobbers some' to retailers 
as well as to jobbers, and others almost exclusively to retailers. An 
indeterminate though considerable quantity is sold to mail order houses, 
A substantial portion of the output of the millinery branch is distributed 
directly to the ultimate consumer as custom millinery. 

Many of the difficulties of all branches of this Industry are direct- 
ly attributable to what amounts to a revolution in distributive technique* 
This revolution has been manifested by a decline in jabbing in all branches 
and by an increase in direct selling. For one thing, many e stablishments 
formerly engaged wholly in jobbing have now turned to the manufacture of 
headwear on their own account. This development has been particularly 
marked in the Middle West. What is more important, particularly in the 
ments hat and the cap and cloth hat branches is that a very considerable 
portion of the total output is absorbed by chain stores, who often con- 
tract for a manufacturer's entire production. In the case of the millin- 
ery branch the rise of syndicate buying has been particularly significant, 
to such an extent, in fact, as almost to eliminate the millinery jobber. 

These changes in distributive technique have all taken place during 
the last few years, and are still in process. The Headwear Industry has 
not as yet been able to adjust itself thereto, and until such an adjust- 
ment is made a considerable degree of instability must be expected, to 
continue, irrespective of the stability the Industry may be able to 
achieve in other directions. 

P rices 

The price structure of all branches of the Headwear Industry is 
national. Notwithstanding the diversity of its product, price is the 
determining factor in competition, because of the ease with which any 
type or style may be reproduced by practically every other manufacturer. 

A reduction in the price of an item of headwear in one state affects 
.all other states. Because labor constitutes such an important element of 
total cost, a.ny reduction in wages is immediately reflected in price, and 
conversely, reductions in price to meet competition from other states 
tends strongly to depress wages in the state attempting so to adjust it- 
self. Reductions in price in one state (whether based upon a wage re- 
duction or other factor) are attended by an increase in the amount ship- ^ 
ped from that state, with a corresponding decrease in the productions \ 

and sales of other states. ^ 

The ca'"j and cloth hat branch offers a striking example of this con- . 
dition. In 1919 49.5 per cent of all caps produced in this country were 
manufactured in New York. In 1933 this figure had fallen to 27.7 per 
cent. This shift in production is attributable almost entirely to the 
lower prices offered by manufacturers in other states, notably in the 
Middle West, and such lower prices were largely predicated unon depressed 
labor conditions. A similar, though less marked, shift has taken place 
in all other branches of the Headwear Industry, and for the same reason. 

The Headwear Indus try "has declined continuously for a number of 
years. [phis decline has been especially marked in the millinery branch, 
though it has been serious in the other branches also. As against a total 
of 127,906 gainfully employed millinery workers in 1910, this branch 
gave employment to only 22,370 workers in 1933. In 1927 this branch dis- 
tributed $46,788,000 in wages, and in 1933, $20,313,000. Over the same 
span of time the value of millinery products fel1 f rom $209,494,828 to 
$77,347,000. In the men's hat branch, employment fell from 21,272 in 
1927 to 17,318 and in 1933, During the same period, total payrolls de- 
clined from $29,277,000 to $15,215,000, and the value of the or o ducts from 
$129,709,000 to $54,91^,000. 


v The .decline; in the cap and cloth hat branch "between 1927 and 1933 
was especially drastic, the value of the products falling from $41,213,- 
965 to $12,558,888. A corresponding decline was registered in employ- 
ment and earnings, . 

From the foregoing it is apparent that, between -1927 and 1933, over 
the Headwear Industry as a whole, employment fell off "by almost one- 
third, payrolls by more than one-half, and the value of the product by 
more than 62 per cent. 

The drastic degree of industrial deterioration indicated "by these 
figures is due primarily to a style trend. In the case of millinery, the 
simpler styled hats which have prevailed since 1925 require much less 
material and labor and are sold at. a substantially lower figure. The 
decline, in earnings, employment, and value of product in this instance 
has not been accompanied, as far as can be determined, by a decline in 
number of units sold. In the case of both hats and caps, however, there 
has also been a serious decline in unit volume, due in the first place 
to the "hatless" fad and in the second to a style trend which has re- 
legated the wearing of caps to a few strictly limited fields - as for 
golf and shop wear. These inherent trends were greatly exaggerated by 
the general economic depression. 

The steady decline in demand brought about intense competitive 
activi-ty in the available markets.' The diminution of demand was attend- 
ed by a downward spiral of price. Since labor cost in these industries 
amounts to about one-third of the total cost of the finished product 
and is the one flexible element of cost,, each- price cut was absorbed to 
a large extent by a corresponding cut in wages. Such wage reductions, 
however, were neither universal nor uniform. 

During the period under review approximately one-third of the en- 
tire Industry was in collective agreement with a labor union. For this 
portion of the industry wage reductions were difficult and in many cases 
impossible. The only possible alternative for such manufacturers was 
migration to non-union areas or sales below the actual cost of; produc- 
tion. When the first alternative was followed, labor in one market was 
left stranded, while the result of the second in many instances was 
bankruptcy. Markets which maintained a high labor standard were rapidly 
being forced out of business in favor of low standard markets. 

In all states except New York, Illinois, California, Massachusetts, 
and Hew Jersey in the millinery branch, wages were cut below subsi stance 
levels. In the State of Texas, for instance, the average annual wage 
was only $534 in 1933, as against $1,098 in New York. The average annual 
wage in Georgia for the same year was only $574. It is estimated that 
about 7 per cent of all millinery workers in that year received less than 
30 cents per hour. Most of such workers were located outside New York 
City. The sub-standard states resulted in a diversion from the higher 
labor standard states of much of their normal business. 

Members of the Industry, in an endeavor to ward off bankruptcy and 
continue in operation, were compelled to employ unfair and uneconomic 
business practices. Although prices had reached abnormally low levels, 
secret rebates disguised as advertising allowances or in other ways be- 
came common. The desire for business and the need for ready cash, coupled 


with the precarious financial status of many members, "brought about the 
allowance~of exorbitant cash discounts. The downward spiral in prices 
was so rapid, and these and other similar practices were so widespread, 
that it became impossible for members of the Industry to know at any^ 
given time the actual prices at which headwear was being sold by their 
competitors, thus further demoralizing an already harassed market. 

The three codes formulated for the three main branches of the Head- 
wear Industries sought to deal with these problems on a broad front. 
These three were as follows: Millinery, Hat Manufacturing, and Cap and 
Cloth Hat. The Millinery Code was designed to cover only that part de- 
signated above as "factory millinery". Private or home millinery was 
not, of course, covered by any code; custom millinery was covered by the 
Retail Custom Millinery Code; and the manufacture of millinery on knitt- 
ing machines was covered by the Knitted Outerwear Code. 

Each of the three codes here studied sought to inprove conditions 
by stabilizing the largest and most flexible item of cost - labor. For 
this purpose, however, a simple basic minimum wage was inadequate. Con- 
sequently, in each case, a definite provision was made with respect to 
wages above the minimu. 

In the case of the Millinery Code this was done by the establish- 
ment of a detailed schedule of occupational minima. The same object was 
achieved in the "Hat Code by the experiment in minimum average wages, and 
in the Cap and Cloth Hat Code by fixing a single minimum, higher than 
the basic minimum, for skilled labor. In this respect the first two 
codes were remarkable for their success; the third was remarkable for 
its failure. This failure is directly attributable to- a poorly devised 
differential in the skilled minimum, a differential which served in fact 
to emphasize the condition it was designed to correct. 

The experience of the several branches of the Headwea,r Industry, 
under these three t" ; n?es of regulation of wages above the minimum, is 
extremely enlightening. Each presents a remarkably good type case, and 
in ai^ry future legislation the mistakes here made and the results here 
achieved might well be taken into account. In addition to establishing 
minimum wages these code fixed maximum hours of labor (35 in the case of 
the Millinery Code, and 4-0 in each of the other code's), prescribed other 
conditions of employment, and prohibitied certain of the most injurious 
of the unfair trade practices. 

In the Millinery branch, where the establishment of a simple minimum 
onl" r would have been wholly inadequate, the occupational minima establish- 
ed in the Millinery Code not only stabilized the important element of 
labor cost but very greatly increased wages. Largely as a result of this 
provision average hourly wages in this branch increased from 41.2 cents 
in 1933 to 54.1 cents in 1934. As a result of higher occupational minima 
which were adopted in the form of an amendment in the latter part of 
1934, average hourly rates for the first six months of 1935 advanced to 
6-3.0 cents, a figure no less than 71.2 per cent in excess of that for the 
corresponding -period of 1933 . 

At the same time average weekly wages for 1934 advanced 30.8 per 
cent above the average for 1933, and the average for the first six months 
of 1935 was 38,4 per cent above the average for the first six months of 


These remarkable increases were accompanied by a decrease of 20 per cent 
in the average hours worked and a 5.7 per cent increase in employment. 
All of these results are. primarily attributable to the influence of the 
millinery code. 

Wage increases under the minimum average wage provision of the Hat 
Code, while not so remarkable , were substantial. A special study of 
wages in a representative group of fur-felt factories comprising 72 per 
cent of the total employment in the industry showed average hourly earn- 
ings to be 69.4 cents in May, 1934. This was an increase of 25.5 per cent 
over the average earnings of the same group immediately prior to the 
Industry's acceptance of the president's Reemployment Agreement. 

Wage increases in certain localities outside the main centers of 
production have been considerably larger than in the industry as a whole. 
A group of fur-felt manufacturers, employing about 1,200 workers and 
located geographically on the outskirts of the Industry, reported average 
earnings of 58.3 cents per hour in May, 1934, an increase of 69.5 per cent 
over the average of 34.4 cents paid by this group prior to the Code. 

These disproportionate increases were necessary to accomplish the 
stabilization of labor costs. The reduction in working hours which, 
prior to the code, ranged from 44 to 54 hours per week and as high as 
60 hours during peak production periods, resulted in the absorbtion of 
practically all the unemployed in this branch of the Headwear Industry. 
This reemployment was brought about in spite of the fact that the rate 
of production in terms of physical units of output was about 12 per cent 
less in 1934 than in 1929. 'Thus, in the face of a declining demand, the 
Indus try was able not only to reemploy its unemployed workers, but to 
reestablish their weekly earnings, even with shorter r hours of work, on 
a level nearly as high as that prevailing in 1929. 

Because of the extraordinary degree of economic control inherent 
in the establishment of occupational minima, it was necessary, in the 
case of the Millinery Code, that great care be taken to prevent such 
control, from working an undue hardship on particular markets and mem- 
bers of the industry. The safeguards here adopted were (a) carefully de- 
vised area differentials; (b) "tolerance" (by which no more than a 
specified percentage of the workers in each craft were required to be 
paid the craft minimum);. (c) a liberal provision for "show workers"; (d) 
adequate provision for apprentices; and (e) a special administrative body 
whose duty it was to consider and" pass upon allegations of undue hard- 
ship and applications for relief. 

Of all the safeguards adopted this latter was by far the most im- 
portant. Occupational classifications in the Millinery Code would have 
broken down completely had it not been for the existence of the Special 
Millinery Board. Tne very volume of applications filed would have swamp- 
ed and clogged the office of the Deputy, had he not been able to refer 
them automatically to the Special Board. 

This agency, moreover, because of its specialized function, was able 
to devote ample time and attention to the consideration of each case. 
This time and attention could never have been given by the deputy 1 s office, 
The use of the Special Millinery Board, therefore, made possible a great- 
er degree of justice than would otherwise have been possible. 



The fundamental issue in the Millinery— Knitted Outerwear Controversy 

was a conflict between t v :0 opposing theories of industry classification. 
The definition of the industry contained in the Millinery Code was based 
upon product , whereas that contained in the Knitted Outerwear Code was 
"based upon p rocess . The controversy arose out of the fact that the p rodu ct 
of the Millinery Code was also manufactured "by the process of the Knitted 
Outerwear Code. This controversy was never settled during the life of the 
Codes, notwithstanding months of hearings and conferences. In any future 
legislation, however, the problem will have to be squarely faced. Pro- 
bably the only solution will be in the direction of a common labor stand- 
ard for all, or at least for the principal branches, of the apparel 
group , 


Tabl e of Contents 


I. Economic Growth of the Industry 

(To indicate major long term changes in relation to the development 
of industry problems) 

II. Analysis of Most Significant Factors 

A. Predominant Control of Raw Materials ^oy Integrated Companies 

B. Significant Shifts in Geographic Location 

C. Growth of Industry Opposition to Labor Organizations 

D. Emergence of Dominant Companies Through Mergers and Consolida- 

III. Significance of Technical Changes 1919-1933 

(To indicate the effect on labor and capital requirements of in- 
creasing furnace capacity, changes in rolling mill methods and the 
development of special steels) 


I. Character of Industry Operations 

(With special consideration of adaptability to integrated control) 

II. Branches of the Industry Covered by the Iron and Steel Code 

(The limits of the Industry, as covered by the Code, are fairly 
definite but there are many interrelations with other Codes both in 
the early raw material stages and in final fabrication) 

III. Problems Presented by the Great Variety of Finished Products 
IV. Consumption Trends 

V. Scope of Industry as Indicated by Classification of Members of In- 
dustry Under the Code 


I. Interstate Movements Predominate in the Assembly of Raw Materials 

II. Close Association of Primary Fabricating Operations 

(By-product coke ovens, blast furnaces and rolling mills and steel 
furnaces are generally closely associated) 

III. Extensive Interstate and Export Distribution 

IV. Interstate Activities of Large Companies 

(The large dominant companies have producing facilities and maintain 
direct sales offices in several states) 



I. Integrated Control a Dominant Factor 

II. Status and Interrelation of Haw Material Codes 

A. Iron Ore Mining 

B. By-Product Coke Industry 

III. Individual Analysis 

A. Iron Ore - (Location, Control of Reserves and Taxation Problems) 
3. Coke Production ~ (Effect of Shift to By-product Coke and Signi- 
ficance of Fuel Economies) 

C. Control of Ferro Alloys 

D. Trend and Significance of Scran Utilization 

(Influence on Price, Furnace Location and Conservation of He- 


I. Export Problems 

A. Position in World Markets 

B. Company Organization for Export 

C. Adjustment of Prices for Export Under the Code 

II. Import Problems 

A, Character and Extent of Import Trade 

B. Survey of Tariff ' Problems 

III. International Organization 

A. The European Steel Cartel 

B. International Sales Agreements 


I, Changes in Financial Methods and Policy 

A. Conditions of Major Companies, 1913-1933. 

B. Effect of Degression 1920-21, 1924, 1929 


I. History of Mergers and Consolidations 

(Early period, formation of the United States Steel Corporation, 
further developments to 1929 and recent developments) 

II. Analysis of Significant Legislation 

(Summary of cases, governmental objectives and results of litigation 
prior to the Code) 

III. Position of the Members of Industry Under the Code « 

A. Analysis of Company Interrelations 
1. Interlocking Directorates 

2« Stock ownership and control 

3. Effect on individual company policies 

B. Relative Position by Companies 

1. Control of primary capacity 

2. Voting strength under the Code 

C. Relative Position of the United States Steel Corporation 


IV. Post-Code Position of the Industry 

(Extent of discontinuance of co-.'e practices and attitude toward 
voluntary agreements) 


I, price Control in the Steel Industry 

A. Long Terra Price Trends of Representative Products 

B. Bargaining position of Producers and Consumers 
(price leadership tyr large producing companies versus 
strong, position of large consumers.) 

C. Evidence Developed Ly Litigation Relative to the Existence of 
Free Competition 

D. Lie t hods of Quoting prices 

E. Evidence of Chaotic price Conditions Prior to the Code. 
E. Effects of the Open Price System Under the Code 

(Stabilization of the price level, uniformity of prices filed, 
standardization of extras and jobbers discounts) 

II. Review of the Basing Point Problem 

A. Pre- Code Status 

1. The Pittsburgh Plus System 

2. Development of Multiple Basing Points 

B. The System as Recongized in the Original Code 

C. As Changed in the Amended Code 

D» Analysis of Special Reports and Points of View 

(The National Recovery Administration, Federal Trade Commission 

and the American Iron and Steel Institute) 
E. Analysis of Specific Problems Related to Basing Point Prices 

(Cross hauling, uneconomic location, fabrication in transit 

and all rail versus water and truck rates) 

III. Analysis of Criticisms Directed Against Code Prices 

A. Increases in Price 

1. Extent of Price Increases for Standard products and Extras 

2. Relation of Increases to Labor and Other Cost Factors — -- 1 - "to 

B. Uniformity and Stability of Prices as Related to" Commercial 
Prices and Government Contracts 


I. G-eneral Description of Labor Forces 

(Character and degree of skill required) 

II. Employer-Employee Relations in the pre-Code period 

A. General Review 

B. Policy of the United States Steel Corporation 

C. Industry Opposition to Labor Organization 

D. Organization and Labor Relations Just Prior to the Code 

III. Analysis of Labor Problems Under the Code 

A. Negotiations Leading to Code provisions 

3. Effects of the Code on Labor Organization and Relations - 
(Company Unions and the Steel Labor Relations Board) 



C. Significance of Wage Increases Under the Code 

D. Character and Effects of Hour Provisions 

1. provisional Acceptance of Hour Limitations 

2. Extent and Effect of Exemptions and Averaging 

3. Adjustments Related to Continuous Processes 

E. Review of Administration and Compliance Records 

IV. Post-Code Conditions 

A. Maintenance of Code Provisions 

B. Effect of the National Labor Relations Act 


I. Review of Problems in Writing the Code 

(Labor provisions, price problems and wide powers granted to the 
Code Authority) 

II. Summary of Principal Changes Due to Code Amendments 

(As related to production and price control, to the provision for a 
study of the Basing Point System, to the creation of a government 
agency to supervise labor relations and to certain restrictions on 
the wide powers granted to the Code Authority) 

III. Organization and Procedure of the Code Authority 

(Representative character, voting provisions and discretionary 

IV. Administration Problems 

(Contractual relations of industry signers of Code limited ordinary 
problems of compliance and administration) 


I. Review of Developments in Post-Code Period 

II. Summary of Major Findings Resulting Prom the Study 

III. Critical Analysis of Future Problems and Issues 



. . .. " . 

PrerLi;?Blnary . Stuamary^of- findings 

Te chn i cal C hange^ 

Very significant changes are taking place which, will affect equip- 
ment, the character of the product and labor requirements. Larger blast 
furnace capacity, new continuous rolling mills and the increasing produc- 
tion of new alloy steels are cases in point. The classification and 
utilization of scrap in relation tn the future demand for iron ore, fuel 
economies as related to the growth of by-product coke production, shifts 
in demand as between railroads and motor vehicles, are all factors which 
may affect industry location, the character of the product and the posi- 
tion of -oroducing companies. 

Industry Organization 

The iron and steel industry is characterized by the dominant posi- 
tion of a number of large integrated comoanies. The United States Steel 
Corporation, as the largest unit, has frequently acted as a price leader. 
A growth in the relative position of other large companies is indicated 
by a review of the history of mergers and consolidations, company in- 
terrelations and the analysis of financial trends. 

Price Control 

The price pattern of the industry is dominated by large scale pro- 
duction unJts. Similar organization in other industries creates similar 
oroblems c Competition between large units tends to produce one of two 
extremes, either disastrous price or price agreements or leadership. 
In considering -pr icing methods it is essential to consider whether they 
are a natural result of such an industry pattern or a contributing cause 
to it. The long term trend of prices has been downward since 1920, For 
the majority of products monthly price variations are common. The degree 
of variation is necessarily limited for standard products in which raw 
material, transportation and high overhead charges are large cost elements. 
Under any pricing system there would be a trend toward stabilization and 
uniformity of prices. Uneconomic location and excessive cross hauling 
may be a.s much characteristic of unlimited free competition of an 
artificial basing point system of pricing. 

Labor Relations 

The outstanding factors in labor relations were the opposition of 
the members of the industry to the spread of Indus try unions, the reluc- 
tance to accept minimum wage rates which corresponded to current practice 
and the desire to avoid acceptance of specific hour limitations. In 
snite of this attitude, however , the very material gain in earnings and 
employment under the code was an important achievement. 

A review of the history of employer-employee relations reveals that 
-practically all of the major conflicts - notably the "Homestead Strike" 
in 1392 and the general strike of 1919 - were the result of emplo-^er 
antagonism to labor organizations, and their refusal to recognize or deal 
with employee-*chosen representatives. It is apparent that the non- recog- 
nition policy of the United States Steel Corporation, as applied to its 

-87- . 

own subsidiary companies, has influenced the policies of independent 
companies as well* 

Between the passage of the Recovery Act and the adoption of the Code 
practically all of the larger units of the Industry established company 
unions or employee representation plans, or as they were called in some 
cases employee representatives. An analysis of these various plans end 
devices shows that they are in no sense designed to accomplish "bona fide 
collective bargaining between employer and employees, but rather that 
they have "ooen used as a means of avoiding or combating the development 
of employee unions. 

During the World War the wages and income of the steel workers rose 
materially. Following the general strike of 1919 the United States Steel 
Corporation put into effect a ten per cent increase in the wages of com- 
mon labor and made some corresponding adjustments in skilled rates. 
Some of the independents followed this lead .with increases. Just sub- 
sequent to the passage of the National Industrial Recovery Act and prior 
to the adoption of the code there was put into effect generally in the 
Industry an increase of* approximately 15 per cent: and further increases 
were made during the code period. Generally speaking, however, through- 
out the history of the Industry, while rates for the higher skilled oc- 
cupations have been fairly in line with those paid to comparable labor 
in other industries, the wage rates for semi-skilled and unskilled labor, 
particularly the latter, have been low. 

The reduced rate of production during the Code period furnished no 
real test of the effectiveness of the provisions limiting hours of work* 
It is not yet apparent how far the hour provisions under the Code will 
result in any permanent change. 

Post- Code Situation 

Reasonably adequate statistics submitted by the Industry through 
September, 1935, indicate that the wage and hour standards set up in the 
Code period have been generally maintained. 

New Quarterly prices had been filed just before the suspension of 
the Coc'e at the end of May 1935, and apparently continued to be observed 
during the quarter ending with August. No new prices were filed there- 
after; but price announcements indicate a substantial general upward 
trend coiring the last quarter of 1935, with probable further increases 
earl?/ in 1936, 

The Secretary of the American Iron and Steel Institute was recently 
ouoted *by the Associated Press as saying that steel makers felt recovery 
"•would be hampered rather than helped by any further legislation design- 
ed to regiment business enterprise/ This attitude apparently reflects 
the Industry* s opposition to labor agreements, particularly when no de- 
finite program of compensating trade practices seems feasible. 




Ta ble of Contents 


I. Industries and Codes Covered 


I. Technological Development 

A. Knitting 

B. The i.iachine 

II. Development of Cooperative Activity 
A. B?r Trade Associations 

III. Development of Cooperative Activity 
A. By Labor Organizations 




I. Definition of the Industry 

II. Products 

III. Methods of iianufacture 

A. Preliminary processing B. Knitting C. Washing D. Dyeing 
E. Boarding F. Finishing 

IV. Size of the Industry 

A. Size of Establishments - By Number of Employees per Establishment 

B. Geographical Location 

C. Size of Town of Location 

D. Degree of Integration of Establishments 

V. Degree of Overlap Between the Three Knit Goods Industries and 
Between the Knit Goods and the Textile Industries 

VI. Migration of the Industry to the South 

VII. Machinery 

VIII. Seamless Branch 

A. Size of Seamless Establishments 



IX. Full Fashioned Branch 

A. Size of Pull Fashioned Establishments 

X. Ease of Entering the Industry 


I . Labor 

A. Employment 

1. Number of Employees by States 

B. Hours 

1. Average Hours per Week 

2. Man Hours 

C. Vages 

1. Payrolls 

2. Average Hourly and Weekly Wages 

3. Area Yiage Differentials 

4. Collective Labor Agreements and Strikes 

II. Production and Distribution 

A. Production 

1. Ban Materials 

2. Raw Material and Labor Costs 

3. Volume and Value of Production 

B. Inter-Industry Changes 

1. St2 r le Changes and Trends 

2. Production by Type of Product 

3. Shipments & Stocks 

C. Distribution 

1. Distribution Channels 
!, Sales Policies of Full Fashioned Mills 
Exports & Imports 




I. Production Control By Machine Hour Limitation 
A. Limitation on Footers 
3. Five TTeek Curtailment 
C- Additional Curtailment Recommended 

II. Production Control by Capacity Limitation 

III. prices 

A. Price Fixing 

B. Lowest Reasonable Cost 

C. Price Guarantees 

D. Raw Material Prices 
32. Homework 


I . Code Adoption 
A. Introduction 
3. Preliminary Steps 


• ~90~ 

C. Point of View on Code at Adoption 
1. Labor Provisions 

( a) Hour s 

(b) Wages 

D. Trade Practices 

II • Administration of the Code by the Code Authority 

A. Code Authority Personnel 

B. Trade Association Relationship 

C. Code Authority Committees 

D. Code Authority Financing 

E. Compliance Activities 

P. G-eneral Activities of Code Authority 

Or. Collection and Dissemination of Statistics 

H. Code Authority Interpretations 

II I • Administration of the Code "by NBA 

A. Development of Codal Administration 

B. Compliance Activities of NBA 

C. Violations of Collective Bargaining Provisions 

I. General Effects of the. Code 

II. Effects of Code Abolition 
III. Post Code Trade Association Activities 




I. Definition of Industry 

II . Construction Details of Underwear 

III. Knitting Variations 

IV. History of Underwear Styles 


I. Plants 

II. Production, Values, Values per Unit 

III. Processes and Methods of Manufacturing 

I . Employment 
II. Man~Hours 



III • Payrolls 

IV. Wages 

I. Introduction 

II. Value of Raw Materials 

III. Shift in Materials 

IV. Value and Volume of Production 

V. Costs of Production 

VI. Seasonality Trends 


I. Stability of Underwear Production Trends 

II. Shifting Importance of Regional Manufacturing 

III. Style Trends 

IV. Labor Problems 

V. Classification - Re; Overlapping Code Provisions 

VI. Exports and Imports 


I . Formulation of the Code 

II. Code Authority Representation 

III. Finances 

IV. Administration of the Code by N. R. A- 

V. Compliance 




I. Definition 

II. Products 



III. Types of Manufacturers 
IV. Industrial and Technological Development 

V. Cooperative Activity Among Manufacturers ' 

A. national Knitted Outerwear Association * 

B. Hand Knitted Sportswear Association 

C. National Hand Crochet Association, Inc. 
ID. Metropolitan Knitted Textile Association 

E. Infants 1 and Children^ Knitted Outerwear Association 
E. Other Trade Associations 

VI. Cooperative Activity Among Labor 

VII. Number and G-eographical Distribution of Esta"blishments 

VIII. G-eographical Distribution of Industry Investment 

IX. Size of Establishments 

X. Number and G-eographical Distribution of Employees 

XI. Amount and G-eographical Distribution of Product Value 


I. Employment 

A. Number Employed and Seasonality 

B. Distribution by States 

II. Hours 

A. Average Weekly Hours. 

B. Man Hours 

III. Wages 

A. Total Payrolls 

B. Hourly Wages 

C. Weekly Wages 

D. Area Wage Differentials 

IV. Child Labor 

V. Learners or Apprentices 
VI. Labor Union Influences 


I. Raw Materials 

II. Processes 

III. Machines 
A. Types 



B. Extent of Use of Each Type 
. C • Age 

IV. Cost of production 

V. Seasonality of Production 

VI. Imports and Exports 

VII. Distribution Methods 

VIII. Trade Practices 

A. Regulatory Measures 

B- Misbranding and Misrepresentation 

C. Returned Goods 

D. Rebates and Manufacturer's Payment of Customer's Accessories 
and Advertising 

E. Consignment Selling 
P. Selling Below Cost 
Gr. Order Cancellations 


I. Contract System of Production 

A. The System 

B. The Problem 

C. ERA Control 

D. Extent of the System 

II. Home Work 

A. The Problem 

B. Extent of Homework 

C. , KRA Control 


I. Code Authority 

A. Election of Officers and Organization 

B. Re-election of Officers 

. C- Protest Against Method of Re-election 

II. Code Authority Functions 
A* Legislative 

B. Compliance in Labor and Trade Practice Provisions 

C. Financing 

III. General Observations 
IV. NRA Actions on Code Matters 

V. General Attitude of Industry Toward Code Authority Administration 

VI. The Code and Its Effects 

A. Attitude of Labor and Industry at Time of Code Adoption 



The Knit Goods Industry is one of the major industries of the United 
States. It consists of three main divisions - Hosiery, Underwear and 
Allied Products, and Knitted Outerwear* 

Although evidence exists of the invention of knitting at a very 
early date, it is definitely known to have "been very popular around the 
time of Columbus. The knitting machine invented "by William Lee in 1589, 
though vastly improved, has undergone no fundamental changes since that 



Hosiery, as a manufacturing industry, ranks within the first 20 
in importance in the United States. In 1929 it had an estimated capital 
investment of $600,000,000, produced $528,700,000 worth of goods, and 
employed 129,500 workers at an annual payroll of $140,079,000. The 
Industry, clearly of interstate character, is extremely decentralized, 
it consists predominately of small units highly concentrated in Pennsyl- 
vania, North Carolina and Tennessee. It is an important user of textile 
fibres, consuming over one-fourth of the United States 1 consumption of 
cotton and silk and 15 'per cent of the rayon. 

The pre— code problems of the Hosiery Industry were similar to 
those of the Textile Industries with idle equipment, very large inventor- 
ies and price demoralization, complicated by economic movements developing 
within the Industry. It also suffered much from economic pressure from 
its customers. 

Employment in the Industry during the depression had declined to 
the 1923 level, and was irregular because of increasing seasonal demand. 
Wages had been drastically cut, in many cases to unsocial levels. 

Results Achieved Under The Code . The Code was of inestimable benefit 
to labor, in abolishing child labor, in decreasing working hours 27 per 
cent, in increasing employment to within 5 per cent of the 1929 level, 
and in checking the trend toward unsocial wages by increasing the average 
hourly wage rate 42 per cent, and increasing weekly earnings 18 per cent. 

Production control provisions, though given much thought, amended 
and widely advocated by the Trade Association, have been largely inefec- 
tual except, perhaps, in smoothing out seasonal peaks. Moreover, they 
apparently discriminated between certain groups in the Industry. 



Price control, without unqualified governmental approval, was 
attempted "but not effective. In 1932 prices had declined to less than 
one half of 1929 values; "but they were partially improved as a result of 
higher labor costs under the Code. 

The Trade Association Code Authority tie-up, apparently did not 
make for the true representation of small and non-Association units. 
After criticism "by the Darrow Board partially corrective steps were taken. 
The Code Authority was marked by an active and efficient administration. 
Its statistical activities are of inestimable value, ip^e prosperity of 
the Industry appears to tie up ultimately with general prosperity and 
with style trends. ' 

Indications are that post-code labor conditions in the Industry 
are little changed from those of the Code period, in spite of the union 
charges of considerable chiseling. Additional data on this phase is 
desirable. Stocks on hand are apparently increasing slightly. Strikes 
have lately occurred in the finishing branch of the Industry. 


The Underwear and Allied Products Industry consists of approximately 
531 firms. Host of these are small or medium sized, and are located in 
milltowns of less than 100,000 population. The firms of the Industry are 
distributed in the following localities: 10 per cent in Hew England, 
62 per cent in the Middle Atlantic States, 16 per cent in the West, and 
12 per cent in the South. 

Approximately 400 members of the Industry are members of the 
trade association, the Underwear Institute. It is estimated that the 
association members produce 80 per cent of the volume and value of the 
I ndus t ry * s pr o cue t s . 

During the pre-code period 1929-1933 the annual production of knit 
underwear was approximately 20,000,000 dozens, valued at $100,000,000 
During the same period the value of the allied products was $55,000,000 
annually. The Code Authority estimated the 1934- value of underwear and 
allied products to be $115,000,000 and $45,000,000 respectively. No 

post-code figures are available on the values of sales. 

During the years 1929-1933 the total number of employees of the 
industry dropped from 41,000 in 1929 to a low of 31,000 in 1931. Al- 
though not strictly comparable, the estimates of the Code Authority 
indicate the industry employed 50,000 workers during 1934. 

The average wage per week per employee during the pre-code years 
1929-1933 was $12 for an average week of 40 hours. During the code 
period the average was $13.00 for a week of 33 hours. 

The labor cost of the Underwear and Allied Products Industry 
represents 20 per cent of the total costs of the manufactured products, 



The cost of materials of the Underwear and Allied Products Industry 
during the pre-code period approximated $100,000,000 annually, or 50 per 
cent of the total costs of the manufactured products. Ho figures are 
available for the code or post-code period. 

Major ills of the Indiistry during the pre-c-o&e period were unemploy- 
ment, long hours, low wages, child labor, homework, price cutting, over- 
production, and idle machinery. After the code was approved, unemployment 
decreased, total working hours per employee were shortened; wages increased, 
child labor and homework- were abolished, prices were stabilized, and over- 
production and idle machinery were reduced. 

The greatest difficulties encountered by the 1T.R.A* and the Code 
Authority during the administration of the code were controversies between 
the circular knit group and the other branches of the industry; overlapping 
problems of classification; and inability to secure compliance, due to the 
failure of the use of labels. 

The controversies caused by the circular knit group of the industry 
were due to the code provision limiting the hours of production of knitting 
machines. This controversy continued throughout the entire code period and 
was not settled at the time of the Supreme Court decision. 

The definition of the Industry contained in the code was not clear, 
and resulted in problems relating to the classification of products be- 
tween the Underwear and Allied Products Industry and the following 
industries: Cotton Garment, Cotton ;Textile, Infants 1 and Children ! s Uearm 
Undergarment ' and' ITegligee, and Knitted Outerwear. Ho definite or satis- 
factory action was ever taken in order to eliminate these difficulties. 

Administration of the Code . The lack of compliance by members of the 

Industry was due to the inability of the Code Authority to enforce the 

code provisions and also to the attitude of indifference on its part and 
on that of the H.R.A. 

The Code Authority was financed by a budget based on a sliding 
scale similar, to the basis of the assessments levied on the members of 
the trade association. This was contrary to later Administration policies 
and should have been corrected. The use of labels by members of the 
Industry was not mandatory. 


The Knitted Outerwear Industry, a recent outgrowth of the Underwear 
and Hosiery Industries, manufactures knitted apparel such as sweaters, 
dresses and suits, infants 1 wear and. bathing suits. Its growth was ac- 
celerated by the T;orld War, the development of new yarns and the adapt- 
ability of the fabric to sports wear. The Industry is largely composed 
of small units highly Concentrated 60 per cent in the Hew York Metropolitan 
area. About 40 per cent of the members of the Industry belong to its 
principal tirade association, the National Knitted Outerwear Association, 
which has assumed the right to speak for the Industry. Unionization, 



confined to the New York area, is small, as only. 17 per cent of the 
employees "belong to the union. 

In 1923, the Industry 1 s peak year, according to the Census of 
Manufactures, the value of production amounted to $197,158,000 necessitat- 
ing the employment of 41,500 wage earners. By 1933, the value of produc- 
tion had declined to $92,547,000 and the employment to 26,908. Figures 
supplied "by the Knitted Outerwear Code Authority show production in 1934 
as $106, 831, GOO and employment as 38,700. 

The Code benefitted labor by increasing employment, raising wages 
and shortening the work week, as appears from the following comparison: 




. Average 
per Week 

Wage Hate 














Child labor is not a great problem in the Industry, except possibly 
in the homework production field, which cannot be investigated. 

Despite the publicity given the matter, imports appear not to be a 
problem of the Industry. The value of imports since 1927 has not exceeded 
2.1 of domestic production. 

In 1929 51*5 per cent of the Industry's total sales value represented 
direct sales to wholesalers, 40.1 per cent represented direct sales to re- 
tailers, 4.3 per cent represented sales through manufacturers own whole- 
sale and retail branches, and 4.1 per cent represented direct sales to 
consumers, both industrial and household. 

Efforts to regulate trade practices were made by cooperation with 
the Federal Trade Commission before N.H.A, oy N.H.A Code, and by voluntary 
trade codes after N.H.A. More data is needed to determine the extent of 
evils from the trade practices. The greatest problem at present seems to 
be that of returned goods. 

Style is an important factor in the Industry 1 s growth and prosperity. 
Style piracy, although not made an object of regulation during N.H.A. , 
appears to exist at least to the extent of annoying design creators. 

Evils in the relationship between the Industry's contractors and 
contract-employers, which were curbed during N.H.A. in the Infants and 
Childrens Wear branch, appear to exist at the present. 

The homework problem, which was of great concern to members of the 
industry during N.H.A, can not be analyzed until data collected by the 
Code Author ity are made available. Figures supplied by homework-employers 
registered with the Code Authority show about 18,000 homeworkers scattered 
throughout 31 states. 

Code Administration . The method of election of the Code Authority as 
approved for this Industry was not satisfactory, was subject to much criti- 
cism and did not result in a truly representative selection. Internal 
politics and the management of a few individuals resulted in control of the 
Code Authority elections. The Code Authority, in arriving at its decisions 
on exemptions, was motivated more by the general Industry effects of their 
decisions than "by the actual needs of the individual., thus in part defeating 
the purpose of a truly representative Code Administration and causing much 
internal friction. The compliance activities of the Code Authority were 
none too well handled. This is indicated by the relatively few inspections 
made, the small amount of restitution collected, and the fact that compli- 
ance hearings in all instances were handled by members of Industry who were 
competitors of the persons charged with violations. The Code Authority 
likewise failed in its compliance activities in that it did not give any 
representation on wage and hour enforcement provisions to labor representa- 

The method of financing this Code is subject to the criticism that 
the cost of collecting funds bore too great a proportion to the gross 
proceeds. Thus we find that during part of the operation of the Code the 
cost of labels sold represented more than one- third of the gross proceeds; 
and when we add the cost of the staff who took care of the label depart- 
ment it appears that nearly 50 per cent of all funds received by the Code 
Authority were paid out as a means of obtaining revenue. 

The National Recovery Administration treated all matters submitted 
by this Code Authority expeditiously. However, the Administration was 
hampered to a great extent by the refusal of the Code Authority to co- 
operate with the established Administrative Policy. 

Complaints were registered against the Code Authority by members of 
the Industry; and statements made by a representative «of one of the Divi- 
sions . show strong resentment against the methods of administration. 

The pre-code conditions in this Industry were at at a very low ebb, 
and regulations of some sort 'were necessary. Statements show that the 
Industry made -substantial gains both for members and for their employees. 

When the suspension of all Code activity seemed probable the Industry 
was strong in its demands for continuance. After the Supreme Court de- 
cision it attempted with great enthusiasm to formulate trade codes similar 
to the N.R.A. Code, but met with failure in obtaining a sufficient majority 
of signed pledges for support. This failure was not attributed to the 
lack of need, but to inertia among individual members and to the physical 
make-up of the industry. In view of the failure to formulate a voluntary 
trade code, the Industry 1 s spokesmen have turned from talk of code continu- 
ation to talk of association support. 

The Industry submitted no voluntary code to the Federal Trade Commis- 
sion in 1935, because there then existed their voluntary agreement pro- 
mulgated in 1931 

Lack of data prevents the portrayal of post^code business and labor 



feble of Contents 
I • De x i ni t i on o f the I ndus t : 

II. Historical Background and, Development 

A. Origin of Tanning in America 
2* Primitive Methods 

C« Influence of the Indians 

D, Development of hew Processes 

1. Beam house Operations 

2. Vegetable Tanning 
Z 9 Mineral Tanning 

4. Curr3 r ing and Finishing 

Ea I.lechariization of Industry 

P» Consolidation 

Crm Integration 

H« Specialization 


I. Number and Grouping of Operating Companies 
A* [types of Organizations 
Bm Types of Products 
C* Volume of Production 
Dm Value of Products 
E« Number and Location of Establishments 

1 1 • Numb e r and G-r oup i ng of Est ab 1 i shnen t s 
A» Types of Products 
B* Volume of Production 
C. Value of Products 
D# Grouping by States 

II I ♦ Number of Employees and Payroll 
A* TJage Earners 
3 9 Salaried Officers and Employees 

IV, Total Volume and Value of Products 

V. Uorld Position of the Domestic Industry 

V I • C ap i tal I nve s t me nt 

VII. Horizontal and Vertical Combinations 
A« Intra—I ndus try Group 

B. Packer- Tanners and Shoe-Manufacturer Tanner 



VIII. I :i t e i" s t a t e Char ac t e r of the I n &us t r y • 

A. Location of Producers 1 Brmches and Agents 

B« ITational and International Sources of Steely of Raw Ma to rials 

in relation to Concentration of Production 
C* Concentration of Production in Relation to Widespread use of 

Products ■ 
D. National Character of Industry's Price structure. 


I. Raw Later ials 

A. Hides and skins 

1. Introduction 

2. U.S. status in world production and consumption 
On Importance of foreign sources of supply 

4. Comoetition among various types of stock 

B, Tanning 

1. Introduction 

2. U.S. production and consumption 

3« Importance of foreign sources of supply 
C* Chemicals and other materials 

II. Machinery raid Equipment 

A. Introduction 

B. Source of Supply 

III. Types of leather "oroduced 
A« On raw stock "basis 

B. On basis of use 

C. Influence of style changes 

IV. Volume of production 

A» Yearly and monthly 
B» By states 

C. By type of nro ducts 
B. On contract has is 

1. Tanned 

2. Curried 
o« Finished 

V. Value added "by manufacture 

VI. Value of products 

A. Yearly and monthly 

B« By states 

C» By type of products 

D. On contract "basis 

1. Tanned 

2. Curried 

3. Finished 

VII.- Volume and Value of Imports 
A. By type of products 

B# Relationship to domestic production and consumption 
C. lie rchandi sing of imports* 

• -101- 

VIII. Productive capacity and utilization 

, A. By operating companies and establishments 
B. By states 

IX. Effect of the depression 

XI. Pre~code, code, and post-code status. 


I. Historical "background 

II. Present channels of distribution 

A. To industrial and other large consumers 

B. To v/holesale organizations and manufacturers i "branches 
1. Wholesalers proper 

2 • Manuf ac tur e r s ! b r an che s 
3. Manufacturers 1 agents 
4» Commission merchants 
5« Selling agents 
6. Brokers 

C. Direct to branches, wholesalers or consumers and through 
agents, commission houses, and brokers 

III • Volume and value of exports 
Am By type of product 

B. Relationship to domestic production and consumption 

C. Merchandising of exports 

IV. llature and volume of advertising 

V. Use of trade-marks and trade-names 

VI. Transportation methods 

VII • .. Effect of the depression 

VIII • Pre— code, code, post-code status 


I. Historical background 

II. Total volume and value of domestic consumption 

III. Classes of consumers and their importance 

A. Volume and value by type of products 

B. Volume and value by states 

IV. Volume and value of competing products 
A» Rubber heels and composition soles 
B* Eibre, textile and wood products 
C* Artificial leathers 


V. Stability of denand 

Af Influence of Boot and Shoe Industry 
B« Other important factors 

C. Loss of product identity 

VI. Effect of the depression 
VII. Pre-code, code, post-code status 


I. Employment 

A. Historical background 
B« By type of products 

C» ; Yearly and monthly 

D. By states or regions 

E. By sex 

F. Skilled and unskilled , 
G-» I7age earners and salaried employees . 

H. By volume and value of products of establishments 

I. Occupational risks 

J. Effect of the depression 

K« Pre-code, code, post-code status 

II. Hours, wages, and payrolls 

A. Historical background 

B. By type of products 
0* Yearly and monthly 
B. By states or regions 
E« By sex 

P. Skilled and unskilled 

G-. 7/age earners and salaried employees 

II. By volume and value of production of establishments 
I • Overtime 

J. Heal wages 

K. Effect of the depression 

L« Pre-code, code, post- code status 

III. Productivity of labor 

A. By type of products 

1. Yearly and monthly 
2» By states or regions 

3. By sex (finishing only) 

4. By employment and volume of production of establishments 
5t Relationship to machinery and equipment 

B. Effect of the depression 

C. Pre-code, code, post-code status 

IV. Euployer-»employee relationships 
A* Historical background 

B. Organization of labor 

1. Number and type of unions 

2. Union membership 

C. Labor disturbances and arbitration 

Dm Labor 1 s participation in ownership, management, and profits 



E# Insurances, pensions, benefits f annual v/age plans, and welfare 

F» Effect of the depression 
G-» Pr encode, code, post-code status 


I. Costs 

A. Elements of cost 

1, Hides and skins 

2, Tanning materials and chemicals 
8. Other materials 

4« Fuel and "oovrer 

5 t Direct labor 

6. Factory overhead 

7« Selling expense 

3, Administrative expense 

3. Relationship of various cost elements to total cost 
C* Relationship of total cost to selling orice 
D« Effect of the depressio?i 


Pre~code, code, post-code status 

II* Prices 

A t Hides and skins 

1* Introduction 

2, By tj^pes 

3« Yearly and monthly 

4» Commodity exchange 

5» Significance of packers 1 oosition 

6« Effect of spot-cash purchases 

7« Influence on inventory 

8. Effect of tariff and government purchase of drought 
hi de s 
£• Tanning and other materials 
C* Leather 

1. Introduction 

2. By t^Tpes 

3m Year]/- and monthly 

4. Sensitiveness of market 

5« Competitive forces involved 

(a) Foreign competition 

(~b) Lack of uniform grading 

(c) Result of "buyers 1 "ores sure 

(d) Destructive price-cutting -Dractices 

(e) Cheaper s and substitutes 
6 Mark-up methods 

7» Importance of speculative feature 
D. Effect of the depression 
E* Pre-code, code, post-code status 


I . Te rra s and disc oun t s 

II. Uniform sales contracts 

III* Design protection 

IV. C o n s i gnmen t s 

V. Customer classification 

VI. Production ^cntrci 

VII. Grading methods 

VIII. Unfair competitive methods 
A„ Soiling below cost 
B« Excessive leniency to customers 

IX. Effect of the depression 

X. Pre-code, code, post- code status 


I . Hi s t or i cal backgr ound 

II. Number and types 

III. Llemb e r ship 

IV. Representation from standpoint of: 

A. Number of wage earners 

Be Volume of production 

C» Value of products 

D. Type of products 

E. Number of operating companies and establishments 
E. Financial responsibility 

G-. Llethods of distribution 
11 • G-e o g raphi cal 1 o c at i o n 

V, Purposes and activities 

VI. Influence wi + i;in the industry, 

VII. Effect of the depression 

VIII. Pre~code, code, post-code status 


I. Classification of operating companies' by capital invested 

II. Financial control of operating companies 

III. Corporate histories of leading concerns 

IV. Failures and liabilities 

V. Profits and losses 

VI. Operating ratios 


I, Formulation of the Code 
1 1 • Sum mar y of Co dal provisions 
III. Administration of the Code 
IV. Appraisal of the effects of the Code 


IIIDUSIKY (Other Than Hiibber) 


I* Definition of above Census group; comparability with Codal defi- 
nition of the Boot and Shoe Lanufacturing Industry 

II. Historical background and development 

A. Origin of shoe-making in America 

B. Early methods employed 

C. Development of processes 
l a Pegged 

2. McKay 

3. Goodyear Vie It 
4a Standard Screv/ 
5. Stitchdoun 

6 a Turn 

7. Lit tie way 

8# Cemented 

9. Moccasin 

10. Mechanization of the Industry 

11a Consolidation 

12a Specialization 


I. Number of operating companies; classified ~by: 

A. Tyoe of organization 

B. IJvpe of products 

Ca Volume of production 

Da Value of products 

E. Humber and location of establishemants 

II. Number of establishments; classified n oyi 
A. I^pe of products 
Ba Volume of productions 
Ca Value of products 
Da States 

III. Number of employees and payroll 
A. Wage earners 
Ba Salaries officers and employees 

IV. World position of the domestic industry 


V. Capital I r vestment 

VI. Horizontal and vertical combinations 
A. Intra-industry groups 

1, Independent opera/ting com-oanies 

2 • J o bb e r-manuf ac t ur er c o r.b i na t i o n s 

5* manufacturer-retailer combinations 

4« Chair- store—manufacturer combinations 
Bt Integrations 

1, Shoe manufacturer tonne r 

2. Manufacturers of leather and canvas-rubber footwear 

VII, Interstate character of the Industry 

A. Location of Producers 7 branches and agents 

13 • Territory covered b' r salesmen 

C. Sources of supply of raw materials in relation to concentra- 
tion of production 

D# Concentration of production in relation to rude-spread use 
of products 

E« Geographical spread of retail outlets over the nation 

F» Hational character of Industry* s price structures 

I. Materials 

A, Leather 




bottom stock 


(a) Types used 

(b) Imports 

(c) Total consumption 



(a) Types used 

(b) Imports 

(c) To taxi consumption 



(a) Types used 

(b) Imports 

(c) Total consumption 

Bi Rubber 




Composition soles 

(a) Types used 

(b) Total consumption 



(a) Types used 

(b) Total consumption 

Cm Te: 






(a) Linings 

(b) Interlinings 

(c) Stays 

(d) Total consumption 



3. Threads 
(a) Use 

(Id) Total consumption . 

4. Felt 
(a) Use 

("b) Total consumption 
5« Silks, satins and "brocades 

(a) Use 

(b) Tota.l consumption 
D« Fibre and uood products 

1- Introduction 

2. Use 

3. Total consumption 

E. Inks, stains and other materials 

1. Introduction 

2. Use 

o« Total consumption 

II. IJachinery and eaui-oment 
A« Introduction 

B. Soiu*ce of supply 

C. Patterns, lasts and dies 

D» Influence of lease-rental system on production 
E» Peak requirements versus normal 

III. Type s o f shoe s pro duce d 

A* By consumer classification 
B» By method of manufacture 

C. Influence of style changes 

IV» Volune of production 

A. Yearly and monthly 
B» By states 

C, By type of products 

!)• By method of manufacture 

V. Value added "by manufacture 

VI. Value of products 

A. Yearly and monthly 
B» By states 

C» By type's of products 

D. By method of manufacture 

VII. Volume and value of imports 
A» By type of? products 
B« By method of manufacture 

C* Relationship to domestic production and consumption 
D» Lie rchandi sing of imports 

VIII. Productive capacity and utilization by: 

A» By operating companies and establishments 

B. By states 

IX* By uro ducts of the Industry 


X. Effect of the depression ; ■' 

XI • Pre— code, Code, and Post-code status 


I# Historical background 

II • Present channels of distribution 
A* Direct to retailers 

1, Chain and department stores 

2» Manufacturer-owned or controlled outlets 

3. Mail-order houses 

4. Independent proprietors 

B • To who 1 e s al e r s and rnanuf ac tur e r ' s who 1 e s al e br anche s 

1» Wholesalers proper 

2» Manufacturers branches 

3 • Manuf ac tur ers 1 age n t s 

4. Commission merchants 

5. Selling agents 

6. Brokers 

C. Direct to bulk and household consumers 

D» Direct to branches, wholesalers or consumers and through 
agents, commission houses, and brokers 

III. Volume and value of exports 
A. By type of product 
B» By method of manufacture 

C. Relationship to domestic production and consumption 
D* Lie rchandi sing of exports 

IV. llature and volume of advertising 

V. Use of trade-marks and trade-names 

VI. Transportation methods 

VII. Effect of the depression 

VIII. Pre— code, Code, Post-code status 


I. Historical background 

II. Total volume and value of domestic consumption; classified by 

A, Shoe stores 
B» Department stores 
C. General merchandise stores 
D# Mail-order houses (catalogue only) ' 
E. Family clothing stores 
P. Lien 1 s clothing and furnishing stores 
&• Dry goods stores 

H. Tibmen 1 s ready-to-wear specialty stores 
I. Variety, 5 and 10 and to-a-.dollar stores 


III. Classes of consumers and .heir iirportsnce 
A« Volume and value "by bvpe of products 
B. Volume and value "by stages 

IV. Volume and value of rubber- sole d : canvas footwear 

V* Stability of demand 

A* Essentiality of footgear 

Bt Relationship of shoe rebuilding to new footv/ear demand 

C# Style influence 

I» Other important factors 

S* Loss of product, identity 

VI. Effect of the depression 

VII • Pre— code, Code, Post-code stratus 


I. Employment 

A# Historical background 

B» By type of products 

C« B3" method of manufacture 

D* Yearly and monthly 

E. By states or regions 

P« By sex 

. G-« Skilled and unskilled 

H« Wage earners and salaried employees ; ■ 

I« By volume and value of production of- establishments 

J« Effect of migration, vocational schools, and cooperative shops 

K« Occupational risks 

La Effect of the depression 

Li* Pre-code, Code, Post-code status 

II*. Hours, v/ages and payrolls 

A« Historical .background .. . 

B* By types of products 

C« By method of manufacture 

D« Yearly and monthly • 

E» By status or regions 

P. By sex 

G« Skilled and unskilled 

H* Wage earners and salaried employees 

I* By volume and value of production of establishments 

J» Overtime 

K* Real v/ages 

L» Effect of the depression > 

1.1 • Pre— code, Code, Post-code status 

III • Productivity of labor 

JU By type of products and by method of manufacture 
1« Yearly and monthly 
2# By states or regions 
3» By sex 

4* '* By employment and volume of production of establishments 
5« Relationship to machinery and equipment 


B« Effect of the depression 

C. Pre-code, Code, post-code status 

IV, Employer-employee relationships 

A. Historical background 
Bm Organization of labor 

1» Number and type of unions 
2» Union membership 

C. Labor disturbances and arbitration 

D« Labor's participation in ownership, management., and profits* 
E» Insurance, pensions, benefits, annual wage plans, and welfare 

F. Effect of the depression 
G-n Pre-code, Code. Post-code status 


!• Costs 

A» Elements of cost 

1» Patterns, lasts and dies 
2* Leather 

Sole material 

Upper material '" 

3» Thread and drill 
4* Containers 

5, Stains and polishes •.•• : 

6* Other materials 
7* Fuel and. power 

8« Direct labor •*■••■:;•■•« 
9» Factory burden 
10 • Royalties and rentals •• 

11 « Selling expense . , . 

12, Administrative expense 

• * 

B. Relationship of various cost elements to total cost 

C» Comparison of costs by type of --roducts and by method of manu- 

D. Relationship of total cost to selling price 
E« Influence of style changes 

P. Effect of the depression 

G-* Pre-code, Code, Post-code status 

II. Prices 

A» Introduction 

B« By type of product and by method of manufacture 

C» Yearly and monthly 

D, Consumer price resistance t 

E, Competitive forces involved 
1. Foreign competition 

2m Lack of grading definitions 
3. Result of buyers 1 pressure 

(a) .Chain storo groups 

(b) Mail order houses * 

(c) Department stores 

(d) Influenco of hide and skin market ♦ 


4» Destructive price-cutting practices 
5» Cheapening product to meet competition 

P. Mark up methods 

Gr« Relation staple line prices to styled line prices 

H« Effect of the depression 

I. Pre-code, Code, Post— code status 


I. Terms and discounts 

II. Design protection 

III. Customer classification 

IV. Grading methods 

V. Unfair competitive methods 

A, Selling below cost 

B« Excessive • leniency to customers 

C. Costly style shows 

P. Contributions to customer advertising 

E. Unjustifiable returns and excessive claims 

P. Unfair cancellation of orders 

C-. Misleading advertising 

E. Special cartons and labels without charge 

VI. Effect of the depression 

VII. Pre-code, Code, Post-code status 


I. Historical background 

II. IJumber and types 

III. I.iemb er ship 

IV. Representation from standpoint of: 

A. Number of wage earners 

B« Volume of production 

C. Value of "products 

D m TVpe of products 

E« Number of operating companies and establishments 

P. Financial responsibility 

Gr. I.lethods of distribution 

H» Geographical location 

V. Purposes and activities 

VI. Influence within the Industry 



VII. Effect of the depression 
VIII. Pre— code, Code, Post-code status 

I. Classification of operating companies by capital invested 
II. Financial control of operating conroanies 
III. Corporate histories of leading concerns 
IV. Failures and liabilities 

V. Profits and losses 
VI. Operating ratios 

I, Formulation of the Code 
II. Summary of codal provisions 
III. Administration of the Code 
IV* Ao~oraisal of the effects of the Code 




Prelimi nary S u mmary of Findings 


The interstate character of the Industry is established ty freight 
movement- and "by the channels of distribution. 

The volume of production declined approximately 25 per cent during 
the depression* ' Prod'action indices on quantity "basis were as follows. 




1935 (1st quarter) 

The oro duct ion on value basis was: 



1934 (Estimate) 

$237*302,228 $278,000,000 

The trend of distribution continued away from wholesalers to direct 
consumer sales. The' degression accentuated this trend. 

Con fro: rot ion Was maintained suprisingly well throughout the depress 
si on, this illustrating the stability in demand for footwear. 

The principal effect of the Code was in the field of employment, 
hours and wages* Average employment was as follows: 





(1st quarter) 

«J.'- , OJ.C 

Tills represents an increase of employment under the Code of 15 per 
cent. Employment indices were as follows: 







1954 1935 

(10 months) 
9.4 102.8 



Dotal payrolls were as follows: 
1955 1934 



(Estimated on basis 
of 1st quarter) 

$54,596,000 $62,785,000 

This indicates an increase in total payrolls of 37#5 per cent in 
1935 as con-oared with 1933, 

This index of payrolls is as follows 3 

1529 1930 1931 1932 1933 

1934 1935 

'(9 nos.) 



73.1 58.5 67.9 83.9 96.4 



Average hourly wages in the Tanning Industry (in cents) were as follows: 
1929 1930 1931 1932 1933 1934 1935 

( S DOS . ) 

50.5 50.3 48.5 42.7 43.8 53.6 56.3 

"Thile labor "benefited directly from the increase in employment and 
average hourly wages, the effect of this increased cost of labor on leather 
prices was negligible until recently e Other factors, such as depression of 
hide prices by reason of the heavy cattle slaughter because of the drought, 
kept leather prices at a low level. Consumer pressure for cheaply priced 
shoes also aided materially. 

The effect of the Code on trade practices was not extensive. Besides 
the usual standard trade practices the Code contained: 

1. Trade terms - finally amended to maximum terms of 2f - 30 days; 
V)o ~ 60 days; net thereafter at 6y interest. 

2. Design Piracy was covered in Article XIII of the Code, but was 
found inadequate in practice. A new Article XIII was framed and 
was about to be approved when the Code lapsed. 

3. A Uniform Sales Contract was adopted after much delay and 

The Tanners 1 Council of America, the national organization of the 
Industry is an efficient and strongly representative association. 

Compliance was excellent luring the life of the Code 336 cases of 
alleged non~ compliance were handled. luring the first nine months of the 
Code the General planning Committee handled compliance cases efficiently. 

The cost to the Industry for code administration was as follows: 

1933 1934 1935 

(last 6 mos.) (to June 16) 

$20,824 $57,308 $26,007 

On the basis of value of production the cost to the Industry represented 
0.02 per cent. 


The manufacture of boots and shoes (other than rubber) is not only 
one of the oldest and most important consumers 1 goods industries, but also 
one of the most important in the country. According to unpublished Census 
of Manufactures data it ranked fifth in number of wage earners, fourteenth 
in cost of materials, and fifteenth in value of products during 1933. The 
Industry's processes are almost completely mechanized, its machinery and 
equipment are highly specialized and efficient, and its productive capacity 
is not excessive in view of peak and seasonal requirements. Its labor is 
of the better class* Eighty to 85 per cent of the wage earners are piece 

-115- • 

workers-, a"bout 45 per cent are women, and around 35 per cent are members of 
one or more of the 10 unions. The outstanding national trade association 
represents nearly 50 per cent of the Industry* s establishments and approx- 
imately 85 per cent of its wage earners and its production, while the other 
dozen or so are local, regional, or special-interest groups. 

The. Industry consists of a large "but steadily decreasing number of 
units, as a result of the abandonment of unprofitable plants or of consoli- 
dations. About one-third of these are comparatively small and are scattered 
over 29 states, but approximately 90 per cent cf the output emanates from 
9 states. Demand for its prcducts and consequently annual production (since 
the present practice has been to manufacture largely against orders) is 
relatively stable. Competition is sharp, distribution policies and methods 
are sound and economical.; with a definite trend toward more direct manu- 
facturer distribution, and the average profit is small in relation to 
volume of business and to capital invested. Practically all members of the 
Industry are engaged in interstate commerce, from purchasing materials and 
leasing machinery to- marketing their products. Incidentally the chief dis- : 
tinguishing characteristic of the Industry is probably that the bulk of its 
machinery and equipment is rented on a lease-royalty basis, with charges 
varying in direct relation to output , and at a lower cost to manufacturers 
than would otherwise be possible. The United States 1 international trade 
in leather footwear is comparatively insignificant and is on the decline. 

Although both gross and net income decreased as a result of lower 
prices, shoe manufacturers as a whole did not suffer as greatly during the 
recent depression as most other industries, because lower costs of materials 
and increased operating efficiency partially offset the trend toward reduced 
profits. Despite the lower purchasing power of the people the production 
of all leather boots and shoes remained at a high level; but the demand 
naturally turned to the cheaper grades, with the result of smaller profits. 
Since 'efficient management has reduced manufacturing costs, the attention 
of the Industry has been focussed on distribution costs and on seasonal 
variations in production, which arise largely from style requirements. 

Results Achieved Under The Code . Findings with particular refeience to 

the Industry* s performance during the depression and under the Code [ •• ,'• —n 

(effective October 13, 1933) may be summarized briefly as follows: 

Employment . The average monthly number of wage earners increased 6.8 per 
cent from the pre-code 12 months to 199,800 in the corresponding period of 
1933-34; then declined 1.3 per cent to 197 9 300 in the same months of 1934- 
35. The average for the calendar year 1929 was 205,600; for 1932 it was 

Payrolls . The average weekly payroll advan ce d 25.3 per cent from the pre- 
cede 12 months to $3,256,000 in the corresponding period of 1933-34; then 
decreased 4.3 per cent to $3,115,000 in the same months of 1934-35. The 
average for the calendar year 1929 was $4,277,000; for 1932 it was $2,616,000. 

i.Ian-Hours . The average weekly man-hours decreased 7.6 per cent from the 
above-specified period of 1932-33 to 7,276,000 in 1933-34, with a further 
decline of 7.9 per cent to 6,740,000 in 1934-35. The average for 1929 was 
9,128,000; for 1932 it v/as 7,365,000. 



Average Hours Per Week. These declined 13.6 per cent from the 1932-33 
period to 36.3 hours in 1933-34, with an additional reduction of 5.8 per 
cent to 34.2 hours in 1934-33. The average for 1929 was 44.3; for 1932 it 
was 41.0, 

Average Hou r ly Wage . This increa sed 38.8 per cent from 1932-53 to 47.9 
cents in 1933-34, and another 6.7 per cent to 51.1 cents in 1934-35. The 
average for 1929 was 49.3; for 1932 it was 34.1. 

Average Weekly Wage . This increas ed 19.4 per cent from 1932-33 to $17.36 
in 1933-34," out then slid off 0.3 per cent to $17.51 in 1934-35. The 
average for 1929 was $21.63; for 1932 it was $14.94. 

Fro duct ion . This ' increa sed 2. 2 per cent from the calendar year 1933 to 
357,119,411 pairs in 1934, and during the first 10 months of 1935 it was 
3.5 per cent above the same period of 1934. The total for 1929 was 
371,207,607 pairs; for 1932 it was 313,289,854. The value of products was 
$965,922, 594" in 1929; $633,879,746 in 1931; and $553,425,166 in 1933, 

Failures and Liabilities * The number advanced from 38 in 1933 to 43 in 
1934, but the amount involved declined from $1,987,109 to $1,298,174. In 
the first nine months of 1935 there were 38 failures, with liabilities of 
$1,211,825; in 1929, 31 failures with liabilities of $1,384,429; in 1932, 
63 failures, with liabilities of $9,157,250. 

Code Administration , Sincere efforts seem to have been made by the 
National Hoot and Shoe iianuf acturers Association to have a truly repre- 
sentative Code Authority (planning and Pair practice Committee),' and by 
the Authority to administer the code provisions fairly. It was, however, 
never specifically authorized to handle labor complaints* 

Compliance . Considerable evidence of non-compliance exists, particularly 
with respect to minimum wages and maximum hours. There vrere comparatively 
few complaints of trade practice violations. 

Trade Practices , Code provisions were limited in scope, and most of them 
were ambiguous and lacked "teeth". Hone covered price fixing or price 
filing. As a whole they seem to have had a moderately beneficial effect. 

Cost of Code Administra t ion . The assessment of the Industry 1 s members 
was one of the lowest — three-hundredths of one per cent of gross sales. 
The approved budget for first year unuer the Code was $126,000 for an 
Industry with current annual sales near the $500,000,000 mark. The total 
collections were $93,122, whereas cash disbursements aggregated $70,525. 
Subsequently a budget of $63,000 for eight months was approved. 



Preliminary Summa ry o f Findings 


I. Descri ption of the Industries 

A. Composition: Principal Products 

3 D Definition: Census and Code 

C c General Production and Logging Methods 

D Jurisdiction and Production of Code Divisions 

II. Scope of Study 


I. Forest Area and Commercial Stand 

A. Total, Commercial, Saw Timber, Cordwood, and Restocking Acreage 

B. Total, Commercial, Saw Timber, Cordwood, and Restocking Stand 
C Stand Accessibility 

D. Softwood vs. Hardwood Stand 

II. Timber Ownership and Value 

A. Ownerships Industrial r Parm and Public 

B. Concentration of Ownership 

C. Stand; Industrial, Parm, and Public ally- Owned 

D. Porest Value: Tot' 1, Average, and Stumpage 

III. Drain and Growth 

A. Lumber Drain 

B. Porest Products Drain, Other Than Lumber 

C. Drain, Gther Than Porest Products 

D. Porest Growth 

E. Trend of Porest products Incident to Drain and Growth 

IV. Cost of Holding 

A. Relationship of Interest to Cost of Holding 

B. Pire Protection Costs 

C. Objectives in Porest Practice 

D Code Regulations and Significance 
E. Code Attainments 


I. General Characteristics 

A. Species and Range 

B. Logging Methods, Mill Size., and Equipment 

C. Production, Capacity, Shipments, Stocks 
D 6 Depletion of Stand and its Effects 

II. Capital and Credit 

A. General Financial Structure 
Bo Credit 


C. Tanes 

D. Analysis of Profits and Losses 

III. Demand Factors in Relation to production 

A, Demands Construction, Wooden Container, and other Industries 

B* .. . Expo r t Demands 

C„ Trend Doward Integrated Manufacturing Plants 

D. Prospective Demand 

IVo West Coast Logging and Lumber Division 

A, Species, Description, and Range of. Hemlock, Spruce, Douglas Fir, 
and Red Cedar .. 

B. Stand and Ownership 

C tt Production, Capacity, Shipments, and Stocks 
D» Demand Factors 

V. Western Pine Division 

A* Species, Description, and Range of Western Pine 
B. Stand and Ownership 

C # Production, Capacity, shipments, and Stocks 
D. Demand Factors 

VI. Southern Pine Division 

A. Species, Description, and Range of Southern pine 

B. Stand and Ownership 

C. Production, Capacity, Shipments, and Stocks 

D. Demand Factors 

VII. Other Softwood Divisions 

A. Species, Description, and Range 
B» Stand and Ownership 

C, Production, Capacity, Shipments, and Stocks 

D. Demand Factors 

VIII* Hardwood Division 

A. Species, Description, and Range of Hardwoods 
B # Stand and Ownership 

C. Production,, Capacity, Shipments, and Stocks 
D 6 Demand Factors 

IX. Cost of Production and Mill Realization 

A. Production Cost Determinants: Logging, Transportation, Mill 
Cost, etc e 

B. Cost under NRA 

C. Mill Realization 

X. Employes, Wages and Hours 

A Employment: Types, Seasonality, Technological, Relation to 
Production, etc 

B. General Lahor Conditions 

C. Wages and Hours: Regions, Shifts,' other Variables 




I. Producers and Consuming Markets: Softwoods 

A. Shipments, 'by Volume and Value 

3. Consumption f "by Species and Regions 

II. Competitions Softwood and Hard-rood 
A. General Discussion of Competition 
3. Competitive Areas and Extent of Competition 
C. Canadian Competition 

III. Price 

A. Pricing Methods 

B. Price and Supply and Demand Ratios 

C. Price: Large Kills vs. Small Mills 

IV. Imports and Their Effect on Prices and Production 
A. Imports by Species and Region 
3. Effect of Imports upon Price and production 
C. Import Duties and Other Taxes 

V. Export Market 

A. Share of United States in principal Foreign Markets 

B. Relation between Average Grade of Exports and Cost of 

C. Export Distribution Channels 

VI. Competition and Distribution 

A. Evaluation of Distribution Outlets 

B. Tendency toward Direct Sales 

C. Marketing and the Code 

VII. Influence of the Wholesaler 

A. ITumber, Types, Function of Wholesalers 

B. Development of Wholesale Channels 

C. Wholesale Outlets 

D. Wholesale Lumber Distribution Costs 

VIII. Influence of the Retailer 

A. Number, Types, Function of Retailers 

3. Retail Costs, Price, Modal Mark-up under Code, etc. 

C. Retailers * Source of Supply 

IX. Employment in Distribution 

A. Decline Incident to Decreased Building 

3. Decline; Payrolls, Hourly Rates, Weekly Earnings 

C. Seasonality of Employment 

X. Influence of Integrated Units 

A. General Discussion of Integrated re the Lumber Industry 
3. Examples of Integration 
C. Results of Integration 



XI. Changes in Transportation Methods 

A. Shift from Water to Rail Transportation 

B. Snicking 

C. Effects of the Code on Transportation 

XI I « Grades and Standards 

A. Situation "before E stabli slime nt of Grading Rules 

B. Present Methods and factors Involved 

C. Effects of Grading and Standardization 

XIII. Interstate Movements 

A. Predominance of Interstate Movement 

B. Relation between Intrastate and Interstate Movements 

C. Interstate Shipments, "by Species, Region and State 


I. Price Control Under the Code 

A. Minimum Price, Differential, Freight Equalization, etc. 
3. Effect on Shipments 

C. Compliance 

D. Abolition, Protest, New Orders 

II. Production Control under the Code 

A. Code Control Provisions 

B. Allotments and Their Transfer 

C. Protests against Control 

D. Increase in New Mills during Control period 

III. Labor Relations under the Code 

A. Increased Labor Cost 

B. Price Increase 

C. Reemployment 

D. Wage Rates 
E# Compliance 

IV. Code Administration and Its Problems 

A. Composition and Administration of Code Authority 

B. Jurisdictional Disoutes 

C. Compliance and Litigation 

V. Distribution Control 

A, Code Provisions and Protests 

B. Regulatory Difficulties 

Cm Code Authority Program for Improvement 

VI. Effects of Cancellation of the Code 

A. Effects on Production, Shipments, Wages, and Price 

B. Resultant Problems 





There are in this country 494,898,000 acres of commercial forest 
land, containing approximately 1,667,803 million feet of saw timber 
capable of commercial use. yifty-two per cent of tliis is owned by com- 
mercial producing companies. The "balance is owned by Federal, State or 
County Governments, with a small .portion (approximately seven per cent) 
in individual farm ownership. 

Of this vast amount of standing saw timber, 62 per cent is concen- 
trated in the three Pacific Coast states, although only 13 per cent of 
the commercial forest area is located in these states. The 11 Southern 
states, which contain 40 per cent of the commercial forest area, have a 
fraction less than 12 per cent of the saw timber stand. 

This large amount of standing timber in private ownership presents 
a significant problem in its maintenance, particularly in view of the 
fact that annually there is a loss ''jy fire, disease and other natural 
cuases of 1,810,899,000 cubic feet, or an amount equal to the annual 
commercial production for 1934. 

In addition, the tax expense of private holdings of timber repre- 
sents- approximately 10 per cent of the amount received for the comnercial 

production. For a long period the increased value of standing timber 
made up a great deal of the natural losses and the increased taxes; but 
with the declining prices of lumber during the depression timber 
values also fell, thus making the investment in standing timber a lia- 
bility instead of a fairly safe investment. 

The Government, due to its large .holdings of standing timber, is 
interested in the reduction of natural Losses and in the maintenance of 
our natural resources, but it had no control over practices in private 
forests, which had brought about a denuding of the areas, as they were 
designed to get the most out of the existing investment without regard 
for the future. 

During the depression the problem was further accentuated by the 
pressure to get rid of the liability of standing timber, by converting 
it into lumber as a means of getting cash. This pressure toward liquida- 
tion has been considered as a chief cause of the demoralization of the 
market. Actually, however, it interfered with understandings that looked 
toward production control, and prevented the reduction of productive 
activity to a level nearer the demand for lumber. It can therefore be 
said to have accentuated the market demoralization rather than to have 
been its cause. 

Under the Code the first advanced steps were taken looking toward a 
long-time program for the continued maintenance of the private forests 
as a natural resource, by providing forestry practice rules that would 
prevent destructive logging and encourage sustained yield. 


■** JL O £_/*""" 


As night "be inferred from the foregoing, there lias developed a con- 
siderably greater capacity for lumber production than can ever be used. 
This is "brought about by the fact that the exploitation of new timber 
areas and the consequent cutting out does not always leave a completely 
denuded area. As a matter of fact the cutting out process continues un- 
til the remaining timber, because of its size and sparseness, is not 
economical for large operations. It therefore follows that the older 
a producing area gets, the smaller and the more intermittent the mill 

Therefore, although there were 20,781 mills registered in 1934, with 
an estimated capacity of 70 billion feet per annum, only 6,734 mills re- 
ported to the Census Bureau as having done in 1933 more than $5,000 in 
business. Although more than one-third of the total production comes from 
Washington and Oregon, these two states together have less than 1,000 
mills. On the other hand an old producing state such as Georgia, for 
example, has 1,418 mills, but is eighth in production, and Mississippi , 
with 1,978 mills, is fourth. 

The factors of excess mills, and particularly a large number of 
small mills with more or less primitive practices, little or no account- 
ing, and an inferior knowledge of the markets, all serve to produce an 
industry incapable of regulating itself intelligently according to the 
needs of its market. 


Lumber is used in three principal markets. The first and largest is 
that of construction; the second is .that for wood products such as furni- 
ture parts, automobile parts, etc.; and the third that of wooden packages. 
Normally construction and construction products take between 65 and 70 
per cent of the lumber produced; industrial uses require 18 to 25 per 
cent; and the remainder goes for boxes and wooden packages. 

There has been a continuous downward trend in the per capita con- 
sumption of lumber, and also a downward trend in the total consumption. 

The highest point of production was in 1905 and 1906, when ap- 
proximately 40 billion feet were produced. In 1928 the output was about 
38 billion feet. During the depression the low point in 1932 was slightly 
in excess of 10 billion feet. Production from 1930 to 1934 at no time 
exceeded 13 billion feet. However, since so great a part of this product 
goes into construction, and since construction dropped in the depression 
years to approximately one-eighth of its level in the boom period, there 
was a slight upward trend in the amount used for construction in relation 
to the total amount of the latter. It may be seen from the foregoing that 
one of the principal problems during the depression was the enormous over- 
production, which kept the price demoralized. This is further seen by the 
stocks on hand, which amounted to about two-thirds of the inventory during 
the construction boom. 

The capital assets of this industry, according to the Bureau of In- 


temal Revenue, which cover only corporations, dropped from $4,000,000,- 
000 in 1926 to $2,549,000,000 at the end of 1933. This excludes the drop 
in assets of the smaller operators, who are as a rule unincorporated. 

The turnover of the industry "based on inventory at the end of the 
year, Slowed down from -four times a year, in 1926, to two and one-half 
times in 1932. Collections moreover calculated from the elapsed time 
from invoice to payment, increased from 75 days in 1926 to 150 days in 
1932. Thus not only wrs the market demoralized through prices and ex- 
cessive stocks, with the pressure of liquidation of standing timber, hut 
the financial position of the industry was also very precarious, and it 
was in a poor credit position. 


The costs of production have varying "bases for calculation. There 
is a tendency in this industry to set a valuation on standing timber that 
fluctuates with the price of lumber, although this relation is not con- 
' stant. However, taking the basis of the ten-year average of sales as 
reported by the Forest Service, we find that the cost of west coast 
Douglas fir lumber was approximately $18.51 per thousand during the Code 
period, with the average wage between 50 and 60 cents. Small mills pro- 
duced lumber at approximately $2 per thousand cheaper. In the Southern 
pine area, with the average stumpage value $3 per thousand greater than 
on the west coast, calculated on the same basis, the cost of production 
for large mills was $24 per thousand, but only $20 per thousand for the 
small mills. 

Labor on the west coast represented 27-1/2 per cent of the total 
cost; while in the Southern pine area with the wage rate approximately 
50 per cent lower, logging and mill labor represented 30-1/2 per cent. 
AH this difference was probably due to the size and density of the stand- 
ing timber. 


In 1929 the industry had 419,084 employees in the six thousand and 
some odd mills doing a business of more than $5,000. Of these approximate- 
ly 39 per cent was employed in logging.. ,In 1932 the Census reported a 
total of 155,100 employees, which rose to. 190,300 in 1933. The average 
for the year 1934, which was the first full year of Code operation was 
226,200 employees. 

The average for wages from 1926 to 1929 in the South was 21.7 cents 
per hour, but in 1932 it had dropped to 11.6 cents. In the Northwest the 
average minimum had dropped from 50 cents in 1929 to 23 cents in 1932. 
In the South 40 per cent of all labor was being paid the minimum, while 
in the Northwest the proportion was. 25 per cent. The Code provisions in- 
creased the minimum from 11.6 to 24 cents per hour in the South, and to 
42.5 cents in the Northwest. However, weekly earnings were not increased 
in proportion, due to the fact that production control reduced the average 
number of hours per Y/eek to approximately one-half of what they were in 




In the early years of the Industry the principal channel of dis- 
tribution was the retailer, who made all sales in his local territory, 
with a large volume of local sales at the mill. As the ^years went on 
local sales continued to "be made at the mills, although these represent- 
ed a much smaller portion of the total than formerly. However, as com- 
petition "between species "became more severe, the channels of distribu- 
tion became more comolicated. 

The second step in theprocess of distribution was the wholesaler, 
with well-placed distributing yards at convenient points to serve retail 
dealers. As this factor in distribution became established, there arose 
competition between such wholesalers and the mills selling direct to the 
retailer. As this competition became more severe, the Y.rholesaler, seek- 
ing a greater return, entered into competition with the retailer for 
sales to large contractors — principally in carload lots and greater. 
In time the sawmills themselves entered into the competition for this 
lucrative business. Hence competition became keen not only amongst re- 
railers, but between retailer and wholesaler and mill for the contractors 
business, and between wholesaler and mill for the retailer's business. 

With all of these factors entering into the situation, the depression 
brought about a severe collapse in prices. There are numerous indica- 
tions that the pressure to liquidate stocks depressed the market — far 
beyond the average of other building material prices. The drop in con- 
struction volume itself, however, was sufficient to brign prices to a 
level below cost. 


'The problems confronting the industry at the time of the N.R.A.. 
were those of: 

(1) Providing employment for approximately 300,000 unemployed mem- 
bers of the industry. 

(2) Raising the price level to a point where wages could be paid 
to these employees. 

(3) Readjustment of stocks on hand to reduce the pressure on the 
marke t . 

(4) Encouraging good practices which would tend to preserve the 
forest resources. 


As has already been stated, the limited hours per week provided for 
by the Code proved to be unnecessary, since the production control, limit- 
ed the hours of operation to a still lower level. Nevertheless, there 
was an increase in employment. It was claimed that the wages demanded 
by the Administration were beyond those that could be paid at the then 
existing price level, unless a fixed price were maintained. 

-1 p^_ 


After much discussion an agreement was reached as to a method of 
price fixing, and a formula arrived at. That this formula was uneconomic 
and incapable of fulfillment was fully proved under the Code. The for- 
mula depended mainly upon the existence of information which could "be 
obtained only by good accounting methods. Such methods were entirely 
lacking except in the largest and "best integrated portions of the In- 
dustry. In general, the courclaints that developed during the operation 
of the fixed prices were that they were uneconomic, that they gave un- 
fair advantages to sore producers at the expense of others, and that 
the price- was arbitrarily fixed at__such a level as to encourage substitutes, 
and failed to increase the demand* As a matter of fact, as shown by 
the actual shipments, the latter kept declining continuously during the 
operation of the Code. Hence there was a failure to relieve the pressure, 
as expected as a result of production control. In addition, adverse 
court decisions so complicated the matter that there was but one course 
left, and that was to eliminate the price control feature entirely. 
This was done in December, 1934. 

Production Control 

Production control was considered by the Industry as its most pro- 
ductive effort. The -oressure of stocks and the continued liquidation of 
standing timber had been such that only by new legislation was it 
possible to prevent a further continuous flooding of the market. The 
provisions in the Code left it to the Industry itself to fix its 
production control methods. 

The conrolaints with regard to this part of the Code were that the 
operating time allowed was insufficient to enable operators to earn their 
overhead; that it encoura-ged new producers to enter the field with a 
resulting increase of 1,600 mills between August, 1933, and Liar ch, 1934; 
and that the rules for the allocation of operating time were controlled 
by the large producers, who fixed them for their own advantage and at 
the expense of the small mills. 

However, after slightly more than a year's operation, the net ef- 
fect of the control feature had been to reduce stocks to a point where 
in May, 1935, the Timber Conservation Board stated that a balance had 
been reached between shipments and stocks on hand. 

C onservation 

As previousl;/ stated, provisions were included in the Code which 
tended to encourage good foresti^ practices. Probahl;/- the most im- 
portant thing that the Code Authority and officials could do along these 
lines was in the nature of educational work. At the end of the Code 
period, however, it was found that a greater number of operators were 
following good forestry practices than had ever been the case before. 

A joint committee was set up to continue the plan of preserving the 
American forest and to carry forward the rules of forestry on a volun- 
tary basis, even after the Code was abolished through the Schechter de- 


The problems still remaining are uneiiroloyraent, private ownership 
of timber beyond what the industry; can profitable bear, and a weak posi. 
tion that prevents improvements which might enable the Industry to go 
forward along new lines * 



Table of C ontents 


I. Code Definition 

II. Jurisdictional Disputes 

Ao Cotton Carmen t Industry 
Be Merchant and Custom Tailoring Industry 
Co Textile Examining, Shrinking & Refinishing Industry 
D. Shoulder Pad Manufacturing Industry and Slit Fabric 
Manufacturing Industry 

F. Infants' and Children ! s Wear Industry 

G. Knitted Outerwear Industry 

H. Rainwear Division of the Rubber Manuf acturing Industry 
Io Army and Navy Clothing Factories 
J. International Clothing Designers 

III* Relationship with Other Industrial and Trade Groups 
A* Piece Goods Division, Wool Textile Mfg. Industry 
3. Retail and Wholesale Trade 

IVo Sketch of Development of the Men's Ready-Made Clothing Industry 
A. Beady-Made Garments 
B» Development of the Factory System 
C. Civil War Stimulus to Factory System 

V. Present Day Scope of Men's Clothing Industry 

A. Number of Establishments 

B. Distribution of Establishments 

C. Value and Volume of Production 

D. Garments Cut, by Principal States 

E. Wage Earners, by Principal States 


I. Organization of Production 

A. Types of Establishments 

1. The Manufacturer-Distributor 

2. The "Integrated" Manufacturer 

3. The Tailor~To-The~Trade Establishment 

B. Technology 

1. Machinery 

II. Raw and Semi-Processed Materials 

A. Cost of Materials 

B. Source of Materials 

C. Ratio of Materials' Cost of Value of Products 



III. Employment and Wages 

A. Ratio of Labor Cost to Value of Product 

IVo Migration in the Men*s Clothing Industry 

V. Labor Relations 

VI • Distribution Channels, Description of 

A. Wholesalers 

B. Jobbers 

C. Retailers 

D. Retail Outlets 

E. Direct-To-Cunsumer 

F. Mail Order Houses 

G. Buying Offices 

VII. Standardization 
A. Measurements 
3. Fibre Contents 

C. Shrinkage 

D. Color Fastness 

E. Proper Labeling to Cover the Above 


I. Decline, in Value of Industry Product 

II. Productive Capacity of Industry 

III. Employment and Hours 

IV. Wages ■ • 

V. Migration in the Men's Clothing Industry 

VI. Extent of Unionization 

VII. Home Work 

VIII. Profit Margins 

IX. Writing of the Code ~ Problems of the Industry not covered 
by the Code 


I. Membership of Code Authority 

A. Formal Recognition and Establishment of Code Authority 

B. Labor Representation on Code Authority 

C. Proposed Consumer Representation on Code Authority 

D. Code Authority Officials and G-eneral Organization 

II. Compliance Procedure 

A# Industrial Adjustment Agency Contemplated 



III* Use of Labels 

A* Left el Publicity 

B. Label Compliance 

C. Labels for Uniform Manufacturers 

D. Retailers' Labels 

Eo Reduced Price of Labels for Children's Suits 

P. Proposed Reduction of Label Charge for Single Pants 

IV. The Budget 

A. Summary of the Financial Reports Covering the Budget 

1. Number and Value of Labels Sold oy Code Authority 
3. Cost of Code Authority to the Industry 

V. Collection and Use of Statistics 

VI, Procedure Authorized but Not Effected 


I« Codal Provisions ~ Issues in Writing 

II. Special Provisions for Overtime 

Ao Overtime for Tailors~To~The-Trade 

33 • Overtime for Uniform Manufacturers 

C. Right of Code Authority to Determine Overtime Period 

III* Exemptions and Denials of Exemptions from Hours Provisions 

IV. Wage Provisions and Issues in Writing 

A. Pro-nosed Amendments of Wage Provisions 

B. Arguments Favoring Pro-cosed Classified Wage Scales 

C. Advisers 1 Recommendations on Proposed Changes in Wage Provisions 

D. Additional Arguments Opposing Proposed Classified Wage Scales 

V. Apprentices 
VI. Home Workers and Handicapped Workers 
VII. Exemptions from Wage Provisions 

VIII. Compliance 

A. The G-reif Case 

B. The Cincinnati Cases 

IX. Employment and Wages Under the Code 

I. Interpretations Submitted for Administrative Approval' 
II. Interpretation Publicity 
III. Administrative Orders Approving Interpretations 



IV. Suggested Interpretations not Approved "by Administration 
V. Classifications 


I. Codal Trade practice Provisions 

II. Consignment Selling 

A. The Case of S. Makraiisky and Sons, Inc. 

B. Cases of Bickey-Freeman Co, and Cohen- Goldman Co. 

C. Case of Moritz and Winter Company 

D. Case of Levy Brothers and Acller Rochester 

E. Complaints Arising from Consignment Exemptions 

III. Cut, Make and Trim 

A. Proposed Amendment to Cut, Make, and Trim Provision 
Bo The Sears Roebuck Exemption Case 

C. Proposed Interpre taut ion of Cut, Make, and Trim 

IV. The Cost Eorumla 

A. Uniform Accounts 

V. Compliance uith Trade Practice Provisions 

VI. Dropped Lines or Surplus Stocks 

VII. Proposed Amendment to Fair Trade practice Provisions 

Ac Fair Trade Practices under Consideration "by Committee 
on Trade Practices 

B. The Trade practice Hearing "10-1" 
1. The Executive Director's Statment 

C» Trade Practice Amendments Scheduled for Hearing 

lo Retailers' Objections to Proposed Trade Practice Amendments 

D. Proposed Trade Practices Submitted by Taalors-To-The-Trade 

and Retailers 1 Objections 

VIII. Proposed Fair Trade Practices for Uniform Manufacturers 

A. Fair Trade Practices for Uniform Manufacturers Approved by 
the Federal Trade Commission 


I. Investment in Industry 

II. Mortality of Industry Units 

III. Capital and Turnover 

A. Contractors' Investment 

B. Manufacturer-Wholesalers'- investment Turnover 
C«' Relationship of Sales Volume to Invested Capital 
D. Price Range in Relation to Turnover of Capital 



IVt Financing 

A* Initial Investment 

2 Q Sources of Credit - Merchandise Suppliers and Banks 

C» Terms 'Granted "by Mills 

1. Effect of Selling Policy of Mills 
Do Governmental Aid 

E Selling Terms 

1» Seasonal Activity Changes 

2. Working Capital 

Ve Operations Affecting Profit and Loss 
Ao Ban Mate rial Price Changes 

1» Analysis of Effect Upon Small, Medium and Large Concerns 

2 1934 Operations 

3„ 1933 Operations 
Bo Pressure from Retailer - Returned Goods and Markdb"wns 
C* Planning and Control 

lo Cost Accounting 

2 9 Irregular practices 

3V Standardized Accounting Need 

- VI • Labor Problems 

Ao Labor' Dispute Direct and -Indirect 
B©' Industry Reaction to Labor Problem 

VI It Conclusion 


Chapter I© Causes of the Controversy 

lo Development in Style, Appearance* and Durability of Cotton 
and Cotton Mixture Fabrics 

lit Decreased Purchasing Power of Consumers 

Hit Decreased Demand for Overalls and Work Pants 

IV# necessity for Lower Selling Prices to Consumers 

V« Widespread Establishment of plants in Rural Communities 
Permitting Payment of Lower Wage Rates 

,VIt Style Trend Towards Separate Coats and Trousers 

•Vllt Increased Interst in Sports, Particularly Golf 

VI I It Wage and Hour Advantages Under Cotton Garment Code 

IXt Price Levels Undermined by Prison- Labor Production 



Chapter II. The Original Approved Codes 

I* Men's Clothing (August 25, 1933) 
A* 3G hour week 

B. 40^ per hour North, 37^ per hour South, minimum wage 
C» 37^ per hour minimum to employees working; on single 

knee pants 
D» $1.00 i~>er hour cutters, 75^ per hour off-pr'essers 
S, Definition "all pants and clothing except cotton wash suiti 

Chapter III. Amendments to Both Codes (December 18, 1933 ) 

I. Incomplete Duplicated Code Definitions Cause of numerous 

Complaints of Unfair Competitive Production of Pants and 
Wash Suits by Cotton Garment Manufacturers 

II. Public Hearings Held November 27 and 28, 1933, to Consider 
Proposed Changes in Definitions and Wages 

III. Code Changes Approved 

A. Definitions - single pants and men's wash suits of 100$ 

cotton content, when made in work clothing factories, 
to be made, under Cotton Garment Code, and all other 
pants and summer clothing under Men's Clothing Code 
B» Wages, Zl<b per hour North, 34^ South minimum both Codes 
for employees on single pants and cotton wash suits, 
85^ and 60^ per hour for cutters and off-pressers' in 
Sotith under Men's Clothing Code 

C. Inter-Code Committee of seven members to be appointed 

to administer and supervise enforcement in respect to 
single pants and cotton wash suits 

Chapter IV. The Inter- Code Commit tee 

I. Appointment and Later Changes in Personnel 

II. Reports of Meetings and Conclusions of the Committee 

III. Committee Recommendations on Code Changes 

IV. Special Agreement Arranged with New Orleans Wash Suit 

Manufacturers by Deputy Administrator Morris Greenberg 

Chapter V. Amendment to the Cotton Garment Code (March 15, 1934 ) 
1. Code Changes Approved 

Ao Specified certain cotton pants fabrics such as denims, 
ducks, etc.,' which could be made under 34^-37^ scale 

B. Special Administrator in place of Inter-Code Committee, 

to be appointed to survey and study re pants Industry 
and submit recommendations 

II. Report of Special Administrator Godfrey Bloch, recommending 
that a 36-hour week be adopted for the Cotton Industry, 
that all single pants if possible be put under one Code or 
a division of one Code under Cotton Garment Wage provisions 



III. These changes as to fabrics used failed to improve the 

situation* It was impossible to enforce two different wage 
scales on garments of similar type in the same plant 

Chapter VI. Amendment to Co tton Garment Code (August 21, 1934 ) 
I. Code Changes Approved 

A. 36-hour week adopted for Cotton Garment Industry ef- 

fective as of October 1, 1934 

B. ITo definition changes as suggested by Deputy Bloch were 

II. Due to many protests from the Industry two stays were granted, 
extending the effective date of the' 36-hour week provision 
until December 1, 1934 
III. Overlapping problem still unimproved due to this delay; Com- 
pliance not strictly enforced by Cotton Garment Code Au- 
thority; Equalization of hours and wages expected to adjust 
major portion of tho controversy 

Chapter VI I • Developments after December 1, 1934 

I. How" Order drawn up and submitted to Industries 

A. Placing all wool and part wool pants under Men*s 
Clothing Code 
•'• B. All cotton pants under Cotton Garment Code 

C. providing for a divisional Code Authority 

D. Temporary lower classified wages for cutters and 

II. Injunction suit filed by certain manufacturers against 

the 36-hour week further delayed any action being taken 
on this pants- order 
III. At time of Supreme Court decision another proposal, per- 
mitting Cotton Garment manufacturers to produce a -small 
percentage of wool pants and men* s clothing plants a 
small percentage of cotton pants if desired, was being 
A. This, as a final solution of the problem, would from 
all indications, have been universally accepted and 



mm*'s 'clothing industry 

• * ; preliminary Summary of Findings 

Two. fairly distinct types of manufacture are employed in the Industry, 
There are establishments which "buy material, cut the cloth, market the fin- 
ished product and finance production from raw materials to finished gar- 
ments, "but which often do not own and operate the plants where the garment 
are made. Secondly, there are establishments called "contract shops" or 
contractors who take cut cloth and accessories from some one who finances 
the "business, and perform the remaining operations necessary to completing 
the garment on a piece price "basis. The areas, not clearly defined, which 
employ the contract-shop method of production are sometimes referred to 
as the "centralized areas", as distinguished from the plants, ordinarily 
found in small towns and cities, which produce the entire garment and are 
described as the u decentralized areas." The plants in the "decentralized 
areas" are highly integrated and usually employ much subdivided processes 
of manufacture. . 

The Lien's Clothing Industry is characterized "by, a high turnover of 
establishments, Tfyhile some few large concerns have a record of operation 
over a period of years, a great number of small establishments enter and 
leave the Industry annually. This situation is not solely the result of 
the low rate of profits and high rate of failures and embarrassments, 
but is in part due to- new alignments of capital and management. Although 
there are approximately 3, .000 establishments in the Industry, a list of 
the 50 largest producers would range down to include firms that produce 
three-tenths of one per cent of the Industry volume. 

As suggested in the first paragraph, various methods of controlling 
the manufacturing and distributing processes are employed in this Indus- 
try. Establishments range in size from a publicly-owned corporation doing 
a nation-Y/ide business to a family establishment manufacturing in a small 
loft or home. Distribution is effected, among other ways, by manufacturer 
control of- retail stores, through jobbers, wholesalers, retailers, direct- 
to~consumer, and by mail order. 

The various methods of production and distribution employed in the 
Industry, and the variations in size and stability of individual estab- 
lishments, have made for lack of standardization and inefficiency in 
cost keeping and pricing systems. 

The principal materials used in the Industry are woolen suitings, 
pantings, overcoatings, etc. Both the volume and the value of these 
materials used slumped sharply between the years 1929 and 1931; but the 
1933 volume and value was somewhat greater. The bulk of these raw ma- 
terials is produced in the states of Massachusetts, Rhode Island, 
Connecticut and Maine. Cost of materials in relation to the value of 
product showed little change for the years 1929, 1931, and 1933, the 
ratios being 48.9, 47.8, and 50.5, respectively. 

The Men's Clothing Industry has never adopted standards with re- 
spect to measurements, fibre content, shrinkage, color fastness, or proper 
labeling relative thereto, in such manner that manufacturers may know how 
raw materials will behave in process, and so that the consumer may know hoi 
an article will wear, 


According to certain competent observers, one of the most striking 
phases of the economic development of the Lien's Clothing Industry "between 
1923 and 1933 was the 'movement of the Industry out of the major manu- 
facturing centers into small cities and country distircts. For example, 
wage earners in the five major manufacturing centers declined from 
94,000 to 61,000 "between 1923 and 1931, or about 35 per cent, whereas 
wage earners outside these centers declined only about 4 per cent. 

Employees in the Hen 1 s 'Clothing Industry are about 85 per cent 
organized.. Union membership is shared by the Amalgamated Clothing 
Workers of America and the United. Garment Workers of America. This 
fact appears to have created two rather distinct groups of employers 
in the Industry — divided upon the wage issue. 

The ;.en*s Clothing, Industry is highly seasonal. In the winter 
clothing is produced for summer wear, and in the summer for winter 
wear. As evidence of wide fluctuation in employment, during the winter 
season of 1934 employment ranged from 139,051 in the mid-September 
week to 122,898 in. the mid-irovernber week. 

In. 1933 the Industry was chara,cterized by heavy unemployment arid 
relatively low wages'. The number of employees amounted to about 160,000. 
Since the greatest number employed in any one month of 1933 was 111,745 
for February,, the probable excess supply of labor was around 48,000. The 

■es of the clothing workers for several years x> r ior to the Code had been 
affected "by the general decline. Actual hours of work declined 10 per cent 
from 1922 to 1932, and hourly rates declined also. In 1922 the average 
hourly earnings were 72*8 cents and in 1932 only 50.6. cents. 

Attempts under the Code to Solve Problems and Results 

The well-organized rival groups within the Industry, created in the 
main through differences over the union question and methods of manufacture, 
made it impossible to establish a Code Authority entirely acceptable to 
the Industry and the Administration. 

In considering the expense of operating the Men's Clothing Code Au- 
thority, the price at which labels were sold (the only source of income) 
was so low (equal to \$ per single garment, plus the cost of sewing on the 
label) that there was no material charge to be added to the cost of manu- 
facturing or to the selling price of the garment. 

Jurisdictio :rl. dispute's early arose between the Men's Clothing Indus- 
try and other codified groups. Hone of these disputes were satisfactorily 
resolved, and in fact many became more and more acute as time went on. 
Even intra-codal relations became exceedingly tense. The Uniform Manu- 
facturers Sub-division of the Code Authority did not to the. end arrive at 
a satisfactory working arrangement with the parent. Code Authority. 

The principal jurisdictional dispute was with the Cotton G-arment Code, 
because of the overlap in the matter of wash suits, work clothing and 
mackinaws. Differences in wage and hour standards as between the two Codes 
and attempts to settle the jurisdictional dispute by codal definitions 
based upon types of garments had the effect of accentuating the difficulty, 
by encouraging the trend toward the production of higher grade cotton 


-136- . 

garments and the increased production. of wool and part wool single pants 
in plants operating under- the Cotton G-arment Code. Despite changes in 
both Codes and the setting-up of inter-code machinery, the dispute was 
never settled to, the satisfaction of the industries concerned or of 
the Administration. ;•• 

The % Code made provision against home work in the Industry and 
appears to have succeeded in eliminating it. 

The Code attempted to ease price competition within the Industry 
"by providing against selling "below cost. A cost formula devised "by the 
Code Authority did not gain Administrative approval, and was, moreover, 
found impractical of application in an Industry where many establishments 
were not acquainted with cost-keeping principles. Alleged violations of 
the cost provision of the Code were used "by the Code Authority as a oasis 
for investigations to gain wage and. hour compliance. 

The fair trade practice provisions of the Code, aside from the 
prohibition of sales "below cost, related only to consignment selling and 
to the practice of "cut, make, and trim" (the jobber or wholesaler con- 
trol of manufacturing processes). From the standpoint of the entire 
Industry these provisions were not of great consequence in terms either 
of dollars or of the number of people concerned. These provisions ap- 
pear to have been enforced with the fairly general approval and support 
of the entire Industry, although some effort was made by the Code Au~ 
tuority to broaden and strengthen the "cut, make, and trim" provision. 

The Code provided for the ultimate consideration and adoption of 
additional fair trade practice provisions, relating to such matters as 
credit terms, terms and conditions of sale and shipment, labeling, con- 
trol of salesmen, etc. provisions regarding these matters did not get 
further than the conference and recommendation stage, because of ir- 
resolvable conflicts of interest between organized retail and wholesale 
groups and the Clothing Industry. The latter was in harmony respecting 
most of the additional trade practice provisions. 

Framers of the Code appeared to recognize from the outset that 
questions of wages and hours of labor were of major importance. The 
Code established a 36-hour week for manufacturing employees and a 
40-hour week for non-manufacturing employees, and provided overtime in 
certain sub— divisions of the Industry. A minimum wage of 40 cents per 
hour was established in the Northern section, and of 37 cents in the 
Southern section.' Likewise, provision was . made for the safeguarding 
of differentials, above the minimum . 

. . The co dal provision relating to wage differentials above the mini- 
mum was of great importance. Efforts at enforcement of this .provision 
required the major portion of the time and money of the Code Authority. 
Around the interpretation and application of this provision were arrayed 
the conflicting groups and interests of the Industry. It became evident 
that the outcome of economic struggles between the high wage and low 
wage -the "centralized" and "decentralized" -groups in the Industry 
depended in a large measure upon the interpretation and enforcement of 
this loosely drawn provision of the Code. Increasing difficulties with 



the general provision relating to differentials above the minimum finally- 
led to a recommendation "by the Code Authority that a definite system of 
classified wage scales be substituted. While apparently possessing ad- 
ministrative advantages, the proposed classified wage scales did not meet 
with the approval of a minority Industry group, and merely served to 
bring more clearly to view the basis of the economic struggle within the 
Industr; r . 

Progress of the lien's Clothing Industry under the Code is statisti- 
cally clear in some respects. Almost 40,000 employees went back to work 
for a period, and average wages which were as low as ,$12.68 a week in 
1933 came back to around $22 in the Spring of 1935. .The total weekly 
payroll of the Industry likewise showed a considerable increase between 
1933 and 1935. 

The record of profits in the Industry is not altogether clear be- 
cause of the lack of complete evidence, yet it appears that the decline 
in capital investment, and the high mortality evident in the Industry of 
recent years was checked somewhat during the brief period of operation 
under the Code. Changed credit terms of woolen mills and higher labor 
costs have tended to expand investment in inventories, while retail 
pressure for lower prices, augmented by the lack of knowledge of costs 
upon the part of many manufacturers, have brought profits in the In- 
dustry to a very narrow margin. 

The effect on the consumer of changes in the Industry during the 
Code period is not definitely known as yet. The meager evidence avail- 
able, however, points to the fact -that Industry gains have not been en- 
tirely at the expense of the consumer. During the Spring of 1935, while 
wages in the Industry were approaching the 1929 level, prices to the 
consumer appeared to be considerably below those prevailing in 1929. 


Table of Contents 



Paper Industry 



If .Paper and Pulp 

2. Newsprint 

3. Paperboard 


Historical Development 

1. World Industry 


2. Domestic Industry 


Manufacturing Processes 

1. Pulp 

2. Paper 

3. Newsprint 

4. Paperboard . 

5. Product Classification 

II. Problems of the 

A. Paper and Pulp Industry 

B. Newsprint 'Industry 

C. Paperboard Industry 

III. /Plan and Methods of Study . 

A. Economic factors 

B. Code experience 

C. Post-code experience 


I. Scope 

A. Totals 

1. Number of Establishments 

2. Number of Employees 

3. Invested Capital 

4. Plant Capacity 

5 # Value of Production (Latest Year Available) 

(a) Value of Sales 

(b) Value Added by Manufacture 

B. Integrated Plants (Pulp and Paper or Paperboard) 
1, 2, 3 f 4 and 5 (Same" as for A) 

C. No n- integrated Plants (Pulp or_ Paper or Paperboard) 
1, 2, 3, 4 and 5 (Same as for A) 

D. Each of Several Size Groups 

l t 2, 3, 4 and 5 (Same as for A) 
E» Each of Several Regions 

1, 2, 3 9 4 and 5 (Same as for A) 
P. Rural and Urban 

1, 2, 3, 4 and 5 (Same as for A) 



II ♦ Materials and Processes 
A. Haw Materials 
1« Description 
2. Availability of Supply 

(a) Forest Conservation 

(b) Self- Sufficiency Program 

(c) Utilization of Waste Forest Products 
B* Processes of Pulp Manufacture 

1. Description 

2% Research and Current Developments 
C» Paper and Paperboard 

!• Description of Various Kinds 

2» Ra.w Materials Used 

3 Manufacturing Processes 

4. Uses 

III* Shifts and Trends in the Industry 
A, Raw Materials 

!• Reasons 
33 • Processes of Manufacture 

1. Reasons 
C« Uses 

It Reasons 
D« Geographical Location of Plants 

l f Reasons 
S. Size of Plants 

!• Reasons 
F» Type of Plant (integrated or No n- integrated) 

!• Reasons 

IV© Production and Capacity 

A« Production Trends Analyzed "by Grades or Products, 
Types of Mills and Regions 
!• Long Term Trends 

(a) Effects of Depression 
00 Effects of Code 
(c) Effects of Code Abandonment 
2m Seasonal Variation 
(a) Causes 

00 Possible Remedies 
Bm Capacity 

!• Practice as to Plant Operating Time 
(Hours per Day, per Week, etc) 

(a) Reasons 

(b) Changes Caused by Code 

(c) Changes since Code Abandonment 

2. Capacity as Compared to Production 

(a) Present 

(b) Post Trends 

3. Condition and Character of Production Facilities 

(a) Age, Speed and Width of Machines 

(b) Obsolescence 

(c) "Floating" Capacity as Compared to "Fixed" Capacity 



4. Effects of Excess Capacity 

(a) Part Time Operation 

(b) Idle Mills " 

(c) Shifts From One Grade or Product to Another 
(Floating Capacity) 

5. Steps "by Industry with Reference to Problems Caused "by 
Excess Capacity 

(a) Pre~Code 

("b) Attempts at Control Through Code 

(1) Approved "by N.R.A. 

(2) Not Approved by N.R.A. 
(c) Post-Code Situation 

V. Consumption 

A. Characteristics of Paper Consumption 

1. Diversification 

2. Paper Dependent Upon Use of Other Commodities 

3. Paper as a Substituting Material 

B. Consumption Trends 
!• Long Term Trends 

(a) Comparison with Other Industries 
Ob) Comparison of Per Capita Consumption Trend with 
Trends in Other Countries 

(c) Analysis of Consumption Trends "by Major Grades 
and Products 

(d) Position in Economic Cycle 
2« Seasonal Variations 

(a) Causes and Possible .Remedies 

VI. Imports 

A» Historical Background 

1. Sketch of Tariff History 

2% Growth of Dependence on Imports 

B # Trends of Imports as Compared with Production and Con- 
sumption by Major Grades and Products 
1« Factors Affecting Trends 

(a) Regional Allocation of Domestic Industry 

(b) Changes in World Lumber Consumption 

(c) Technical Research 

(d) U. S» Government Policies 

(e) Foreign Government Policies 

C. Summary of Condition Likely to Affect Imports 
1. Limited World Supply Available Pulpwood 
2m Trend in World Paper Consumption 

3* Costs as They Affect International Competition 

(a) Currency Fluctuation 

(b) Government Ownership of Pulpwood Forests 

VII. Exports 

Am Trends of U. S. Exports by Major Grades and Products 
B« Factors Affecting American Competition 
C» Possibilities (general) of Exports Relieving Excess 
Capacity Situation 




VI II* Distribution 

A. Various Methods of Marketing for Each Grade or Product 

B. Extent to which Each is 'Used 

C. Description of Each Method 

D. Customary Discounts and Commission 

E. Problems 

1. Sales to Other Industries for Farther Manufacture 

2. Sales through Agents or Brokers 

3. Sales through Wholesalers 6r Jobbers 
4. . Sales to Retailers 

5. Sales Direct to Consumers 

6. Sales to Buying Agents 
(a) Syndicate Buying 

P. Trends and Shifts in Distribution Channels 

1. , Historical Development 

2. Trends in Volume through Each Channel 
G-. Problems. Relating to Distribution 

1;*.. Steps Taken by Industry with/Reference to These Problems 

(a) Pre- Code 

(b) Attempts at Control through Code 

(1) Approved by N.R.A. 

(2) Not approved by N.R.A. 

(c) Post-Code Situation 

'• * t 

IX. Standardization " . 

A. Heed for Standardization of G-rade s 

B. Difficulties of Standardization 

C. Progress Made to Date, and by What Agency 

1. Pre-Code 

2. Under Code 

3. Post-Code 

D. Extent to Which Standards are Accepted- and Observed by Members 
of the Industry 


I. Investment Requisites 

A. Effects on Prices, of Large Investments Needed for Paper Making 
and Most Paper Converting 

B. Effects on Prices of Investments in Equipment for Lines of Prod- 
ucts which Pace Increasing Competition or Diminishing Markets 

C. Effects on Prices. of Diversion of Equipment from One Line of 
Paper Manufacture to Another '*' 

II. Raw. Materials ...♦.'• 

A. Pibrous Raw Materials 

1* Pulpwood Price Trends, Influence on Wood Pulp Prices and on 
Competition between' Domestic Manufacturers and Importers 

2. Wood Pulp Price Trends with Special Reference to Domestic 
and Imported Prices 

3. Wood Pulp Prices Compared with f.o.b. Mill Prices on Pulp- 
Making Chemicals and Coal, with Particular Reference to 
Regional Differences 

4. Cost Differences between Self-Contained (Integrated) Mills 
and Converting Ones 



5. Waste Paper Price Trends 
• 6, Influence Affecting Waste Paper Prices 
7. Other Fibrous Materials, Price Trends 

0. Factors Affecting Use and Competition "between Wood Pulp and 
Other Fibrous Paw Materials 

9. Effects on Paper Prices of Competition between Different 
Kinds of Fibrous Raw Materials 
B. Non-Fibrous Raw Materials 

1. Trends of Prices, Pulp and Papermaking Chemicals by Regions 

2. Influence of Chemical Prices on Pulp Costs and Paper Costs 

3. Influence of Transportation Costs of Chemicals in Regional 
Allocation of Industry- 
Ill. Manufacturing Elements 

A. Coal Price Trends, by Regions 

B. Influence of Coal Prices upon Manufacturing Costs 

C. Power Costs by Regions 

D. Relation Pulp and Paper Industry to power Industry 

E. Supplies (felts, wires, etc.) Price Trends and Influences on 
Manufacturing Costs 

IV. Primary and Fabricated Products 

A. Primary Paper Grades 

1. Price Trends of Key Grades 

2. Relation Price Quotations to Mill Realizations 

3. Inter-relationship of Grade Prices 

4. Variations in Grade Differentials 

5. Effects of Grade Inter-relationships on So-Called Price 

B. Comparisons Paper Price Movements with Other Commodity Price 

C. Comparisons Paper Price Movements with Raw Material Price 

D. Converted Paper Products 

1. Price Trends Converted Paper Products 

2. Comparison of Prices of Converted Paper Used for Manufacture 

E. Comparison of Prices of Paper and of Converted Paper Products 
with Prices of Competing Articles 

F. Influence on Prices of Struggle for Markets between Integrated 
and Independent Manufacturers and Converters 

V. Dominant Companies and Groups 

A. Analysis of Production in Chief Divisions of the Paper Industry 
as Related to Market Domination 

1. Influence of Dominant Groups of Producers on Paper Prices 

2. Influence of Large Consumers, Individuals or Groups, on 
Paper Prices 

B* Effects of Consolidations or Changes in Number of Producers on 

C. Comparisons of Conditions in Paper Industry with Those in Other 


!• Paper Price Trends Compared with Prices Other Commodities 

2. Influence on Paper Prices of Factors such as 

(a) Regional Shifting of Industry 

(b) Development of Mass Production and Distribution 



(c) Excess Capacity and Suggested Methods of Eliminating 
Such Capacity; and 

(d) Grade Shifting 

VI. Buying and Selling Practices • 

A. Development of Terms 

1. G-eneral Practices Regarding Length of Contracts 

2. Influence on Prices of Long Term and Continuing Contracts 

3. G-eneral Practices Regarding Quantity Discounts 

4. Influence on Prices of Large Volume Purchases 

5. Influence on Prices of Cooperative Buying Agencies 

B. Distribution Costs 

1. Transportation Charges 

2. Freight Equalization Practices 

3. Commissions 

4. Discounts . . 

5. Service Charges 

C. Development of Standard Terms, Contracts and Other Trade Cus- 
toms Tending to Simplify- Price Structure 

VII. Influence of Foreign Prices 

A. Canadian and Other Foreign Newsprint 
B« Foreign Pulp Versus Domestic 

C. Effects of Depreciated Foreign- Currencies on Foreign and Domes- 
tic Pulp and Paper Prices 

D. Effects of American Investment in Canadian and Foreign Mills 

E. Effects of Tariffs 

VIII, G-overnment Contracts 


I . Employment 

A» Character and Supply of Labor 

1. By Size and Type of plant, Skill and Sex 

2. Mobility 

3. Trends of Labor as to 

(a) Urban and Rural 

(b) Migration . . 

4. Primary Versus Converter Plants 

B. Seasonal Characteristics 

1. Extent 

2. Effects 

3. Attempts to Regularize 

C. Child and Female Labor 

1. Proportion in Each Industry 

2. National or Local Condition 

3. Occupation of These Groups 

4. Trend 

D. Productivity of Labor 

1. Trends by Type of Plant, Zone, Urban and Rural 

2. Factors Influencing Productivity 

3. Technological Advancement 



II. Wage Rates and Earnings 

A. Historical Trends of Employment and Payrolls as Related To Pro- 
duction and Value of Production 

B. Labor Requirements of Different Types of Kills, Especially Self- 
Contained and Converting Mills - Related to Average Earnings 

C. Wage Rate Trends Selected Occupations by Regions for Number of 

1. Compare with Indices of Wage Rates all Labor and Similar 

D. Relation of Wage Rates to Machine Sizes and Speeds and Effoct 
of This Relationship Upon All Productive Labor 

E. Rural Character of Labor in Primary Manufacture and Influence 
upon Wage Rates 

III. Hours of Work 

A. Trends of the Industry in Respect to Hours of Labor 
1« Effect of Shortening Hours Upon: 

(a) Employment 

(b) Average Earnings per Worker 

(c) Labor Costs per Unit of Production 

2. Effect of Further Shortening of Hours Below 40 Hour Limit 

3. Need for Flexibility in Hour Limitations 

B. Seasonal Fluctuations in Working Hours 

1. Compare with Other Industries 

2. Methods of Equalizing Earnings 
(a) Averaging Periods 

IV. Availability of Skilled Labor 

A. Training Necessary 

B. G-eographic Concentration of Trained Workers 

C. Problem of Obtaining Trained Workers in Isolated Communities 
I). Training Methods 

V. Labor Costs 

A. Portion of Pulpwood Cost Paid Labor 

B. Labor Costs in Pulp Manufacture 
C 9 Labor Costs in Paper Manufacture . . 
L. Labor Costs in Conversion 
E* Summary of Total Labor Costs in Finished Paper Product 

1. Related to Price 

2. Related to Comparable Lata in Other Industries 

VI. Relation of Payroll Fund to Other Budget Items in Paper Manufacture 

A. Fixed Character of Other Costs 

B. Cost Reduction Possibilities 
lo Greater Production of Given Facilities 

2. Reduction of Employment ■ . 

3. Wage Reductions 

VII. Labor Organization 
A. Trade Union 

1. Historical Background 

2. Relations with Employers 

3. Activities 



B. Company Unions 

y ; 1, Historical Background 

2. Scope and Character of Activity 

VIII. Welfare Activities 

A. Unemployment. Insurance 

B#* Pensions and Liability Insurance 

C. Health and Accident Group Insurance 


I . Cost Structure 

A. Labor - Wages 

1. Ratio of Wages to Value of Products 

2. Relation between Wages and Tctal Cost of Production 

B. Paw Materials- 

1. Trends in Cost by Mills and Area 

2. Relation "feet-ween Cost of Paw Material and Value of Prod- 
ucts; Total Cost of Production, Ratio 

3. Effect of Tariff Legislation of Raw Material Costs 

4. Relation "between Supply of Raw Material andLarge Integra- 
ted Plants 

5. General Cost Bifferences Self-Contained Mill and Converting 
Mill Operation 

C. Equipment 

1. Trends in Cost and Bepreciation 

2. Present Status 
B. Investments 

1. Financial Requirements of Industry; Investment Necessary 
Compared with Other Industries 

2. Bifferences in Financial Requirements by Types of Mill, 
Self-Contained and Converting 

3. In Pulpwood Reserves and- Carrying Costs 

4. Trends; Overproduction Due to Over-Investment; Policies 

5. Relation of Investment Cost and Total Cost of Production 
by Industry 

6. Change in Method of Financing Commercial- Paper to Security 
Groups and Effect on Costs ..•-. ; 

E. Overhead 

1. Ratio to Value of Products by Industry ( • 

2. Compare with Other Industries 

3. Analysis of Main Elements 

F. Relation of Cost to Markets 

1. Trends and Total Cost of Bistribution 

2. Compare Cost of Bistribution with Cost of Production 

3. Effect of Freight Rates on Cost 

II. Capital Structure 

A. History, Characteristics and Trends in Corporate Set-Up. 

1. Principal Owners of Industry 

2. Alliance with Other Industries Such as Power and Newspaper 
Publishing. (Newsprint, Canada and U. S. ) 

III. Financial Statistics 

A. Analysis Balance Sheet and Profit and Loss Statistics Typical 
Companies Representing Large and Small and Converting and Self- 
Contained Mills for a Period of Years 



1. Trend of Working Capital - Assets Ratios 

2. Trend of Current Assets - Current' Liabilities Ratios 

3. Trend of Net Worth - Total Liabilities Ratios 

4. Trend of Sales - Inventories Ratios 

5. Trend of Sales - Net Worth Ratios 

6. Trend of Operating Profits - Sales Ratios 

7. Trend of Operating Profits - Net Worth Ratios 

B. Comparison with Similar Statistics for Other Industries 

C. Operating Profits on Sales Compared with - 

1. Price Indices 

2. Production - Capacity Ratios 

3. Data for Paper Mills Compared with J 
(a) Price Indices of Pulp 

("b) Price Indices of Newsprint 

4. Indices of Wage Rates , ' 

3D. Comparisons with Companies Exporting to the United States 
1# Canadian Newsprint Companies 
2. Swedish, Finnish and German Pulp Companies 

IV. Financial Conditions 

A# Trend of Ratio of Operating Profit on Sales over a Period of 

Years for Selected Companies 
B. Compare with Similar Trend Other Industries 
0. Compare with Production and Price Trends 

D. Compare with Capacity Increases in Domestic Mills and in 
Canadian Newsprint Mills 

E. Compare with Price Trends Wood Pulp and Newsprint Paper 

,3F. . Break-down Financial Statistics to Show Various Relationships 

and Compare with Similar Break-downs In Other Industries 
G. Relation Between Prices, Production, Profits and Dividends 
H. Trend of Failures by Industry and Causes 

V. Expansion of Industry Through G-overnment Financing 


I. Associations 

A. Pre-Codc History 

1. Organization 

2. Members 

3. Objectives 

(a) Technical 

(b) Marketing 

(c) General 

(d) Effects 

B. Reorganization for Code Purposes 

1. Details 

(a) By-Laws 

(b) General 

2. Changes in Activities 

3. Effects 

(a) " On Associations; on Their Members 

(b) On Non-Association Members 


II. Code Administration Agencies 
A* Method of Selection 

1. Describe Method 

2. Representation of Industry 

(a) Size of Establishments 

(b) Number of Establishments 

(c) Geographical Location 

B. Personnel 

1. Members 

2. Types of Establishments 

(a) Small or Large 

(b) Integrated or Non-Integrated 

C. Finances 

1. Amounts Collected 

2. Methods of Assessments 

3. Expenditures 

D. Procedure 

1. Method of Procedure 

(a) Handling Complaints 

(b) Powers and Duties Provided in Code 
' 2. Attitude of Members 

3. Effects 

III. Advisory Management and Technical Agencies, etc. 
A. Types 

1. History and Philosophy 

2. Describe Methods Employed 

3. Effects 

(a) Code Period 

(b) Post-Code 

4. Duties Delegated by Code Authority 


I f Code Provisions 

A. Purposes 

B. Analysis 

C. Administration - Organization and Functions of 

1. Code Authority 

2. NRi Groups 

II. Pre-Code - Code - Post-Code Status of 

A. Labor 

B. Production 

C. Prices 

D. Trade Practices 

E. Corporate and Financial Relationships 

F. Industrial Organization and Administration 

III. Evaluation 

A. Effects of the Codes on the Paper Industries as Evidenced in 
II Above 

B. Code Provisions as a Solution for the Problems of the Industry 





The manufacture of paper and paper products constitutes one of the 
largest industries in the United States, from the standpoint "both of in- 
vestment and of value of product. 

The innumerable types, sizes and grades of paper manufactured result 
in confusion to the "buyer. The steps taken toward standardization, how- 
ever, have not approached a solution of the problem. 

Until the latter part of the last century the principal source of 
raw materials was rags; today pulpwood, usually Northern evergreen, con- 
stitutes the largest source, although recently the sulphate process has 
permitted the use of other woods, particularly those native to the South. 

The consumption of paper and paper products has increased without 
recession, except in periods of major depression. Productive capacity 
has increased steadily in the Industry as a whole, even during the period 
1929 ~ 1932, when production was receding. In recent years, however, the 
increase has been the result of technological developments rather than of 
the establishment of new plants. 

Although the consumption of newsprint in the United States has in- 
creased rapidly and steadily, production has decreased simultaneously 
with the increase in Canadian production, financed for the most part by 
United States capital. In the newsprint branch domestic productive 
capacity has been reduced in recent years by the shifting of machines to 
the manufacture of other products and by the abandoning of some mills. 

Exports of newsprint and other paper are inconsiderable in relation 
to the United States production. A large part of the domestic product 
crosses state borders in the form of raw materials, semi-finished and 
finished goods. 


The large investment of capital required by the Industry in relation 
to the volume of production results in an unusually high percentage of 
invariable s in the cost structure, which act as a drag oh the frequency 
of price changes. 

Prices of the various grades of paper tend to have a constant rela- 
tionship; a change in the price of a single grade will upset this rela- 
tionship and will cause a complete disruption of prices in the entire 

The prices of raw materials used in paper making appear to move in 
sympathy with the general price level; whereas the prices of paper, while 
moving in that manner on major swings, of which the timing is as yet un- 
determined, show marked idiosyncrasies on minor movements within the 
cycle. These appear to be part of the price pattern peculiar to this 


This price pattern 1 Is believed t'6 "be the result of the same factors 
that cause price rigidity. 

While the import situation is all important with regard to the price 
of newsprint, on which there is no protective tariff, it is not an im- 
portant factor in the prices of grades of paper that are protected* Fur- 
ther, the influence of debased foreign currency in newsprint producing 
countries did not have an upsetting effect, "because transactions were in 
dollars and "because of the ensuing change in the valuation of United 
States currency. 


Available statistics indicate that employment in 1929 in the sec- 
tions of the Paper Industry covered by the study was approximately as 
follows: Paper and Pulp, 105,000; Paperboard,' 32,000; Newsprint, 9000. 

The decrease in employment from. 1929 to May, 1933, in these indus- 
tries, was from 18 to -27 per cent. 

During the period of- the codec very substantial increases in employ- 
ment were recorded, 

There is no indication of a decrease in •employment following the de- 
cision of the Supreme Court. 

By May, 1933.,. hourly" wages were approximately 25 per cent below the 
1929 l©vel# 

Under the Ctede 'hourly wages increased to approximately the 1929 level* 
There was no " appreciable increase in weekly wages, however, until „Decem~ 
ber 5 1934, Total payroll .figures are not available. 

Due to the-" pea-ding appeals from denials , of .. exempt ion*- from the^pro~ 
visions of the amendment to the Paper and Pulp Code, the latter had. little 
effect in iacroa&iag w3£o*.. 

mm&QJ^gSL ' '" • 

^lthoragh m^mkers ef tho Paper Industry have generally'' aoccrptod- stand- 
ard methods of costing, the individual characteristics of each plant, its 
surroundings,- it* location,- etc. make, for differences ia oost. 

A.vailah.3 .data show that the <everage coat' of -producing "newsprint- -in'' 
the United States -and iiwDanada are not widely- different. 

There is A-wiAe difference in- costs-* -n^verthr>los© # a* tetween- thp- 
various jain^ 

Ivailable data from, a few mills indicates that during- th*» period May 
to December, 1933, the cost of producing newsprint increased about ten 
per cent. The major p*vrt of the increase came in the items of wood, pulp., . 
power, -anA ..labor ^ 

-15..0- .., 

While the Industry as ' a whole showed a. profit of slightly over three 
per cent of sales over the eight year period 1926-1933, the percentage of 
companies not making a profit has run from thirty-one to seventy- seven. 

The above indicates a vast difference in the relative profitability 
of individual companies. ■ 


Since 1878 the Paper Industry has been characterized "by very active 
trade associations, dealing with practically all phases of 'industrial 

The Executive Authority. of •- the : - American- Paper and Pulp Association, 
the Advisory Committee of the Newsprint Association, and the Executive 
Committee of the National Paperboard Association were designated as the 
administrative agencies for their respective code's. 

No budgsts were approved for these industries by the N.R.A., but the 
expenses. of the administrative agencies were borne by associations. • Many 
activities of the' administrative agencies were combined with association 

The Paper' and' Pulp; Newsprint and Paperboard Industries operated with 
a significantly small number of compliance cases'. "• "■ 

Oh some- occasions 'the. -paper Industry Authority exercised powers be- 
yond those provided for in the Code. •""'.: . 

* . . •• 
The Newsprint 'C&'de: Authority,, .after ^failing to get favorable action 

under Section'3(e) of the- Recovery Ac.ti\presented : a'plaii of " stabilization 

for the Industry to the .N,.R*A» , This. .was not approved^' ■ . '. ' 

In the Paperboard- Industry ■• efforts, were made to establish a plan for 
industrial stab ill zatio-n' through restrictions on productive capacity and 
control of the waste paper markets. "*"' .-.:*. , 


Table of Contents 

I, Definition and Division of the Industry 
II. History .and .Development,, of .... the Industry 
III. Wide Diversity of Products and Uses of Rubber 
IV. Plan and Extent of the Study 


I. Scope 

A. Declining Number of Establishments 

B. Unprofit ability and Shrinkage of Demand as Causes of Decline 
in Number of Establishments 

C. Location of Establishments by Area and Lack of Trend or Mi- 
gration to Any One Location 

D. Number of Wage Earners 

E. Number of Wage Earners by States 
P. Shrinkage in Invested Capital 

G-m Declining Value of Industry Products, by Classification 
H* Production and Consumption of Rubber Tires by States, Indicat- 
ing Interstate Character of Commerce in Tires 
J, Excess Productive Caoacity of the Industry 
K. Seasonal Fluctuation and Declining Trend of Production- 

II. Distribution, Competition and Prices 

A, Variety in Type and Number of Distribution Outlets 

B» Confusing and Illogical Price Structure of the Industry 

C. Character and Intensity of Intra-Industry Competition 

III. Financial Aspects 

A. Corporate and Subsidiary Structure for Specialized Functions 

B. Comparison of Profitability of Tire and Other Rubber Goods 

C. Unpr of i ity of the Tire Industry 

D. Declining number of Profitable Tire Companies 

E. Increasing Percentage of Tire Companies Reporting Losses 

F. Increased Deficits Due to Payment" of Unearned Dividends 
G-. Taxes Paid by Tire Companies 

H. Transfer of Capital and Production Abroad 

J. Record of Insolvencies in the Rubber Industry 

IV. Wages 

A. Effect of Depression and Codes on Hourly Wages 
B» Effect of Depression and Codes en Weekly Wages 

C. Effect of Depression and Codes on Annual Payrolls 

D. Increasing Importance of Wages as an Element of Cost 

E. High Wages Paid by Tire Industry in Comparison with All 
Other Industry 



V. Employment and Hours 

A. Decrease in Average Weekly Hours in the Tire Division 

B» Decrease in Average Weekly Hours in Other Rubber Goods Division 

C. Fluctuations in Employment from 1926 to 1935 

D. Seasonal Fluctuations in Employment 

E f Increasing Productivity of Labor in Tire Manufacturing 
F« Displacement of Labor Due to Technological Changes 
G-. Summary of Employment, Wages and Man-Hours 


I. Foreign Control of Raw Materials 

A. Fluctuations in Rubber Supply and Price Due to the Stevenson 
Rubber Restriction Act 

B. Effect on Rubber Supply and Price of the Current International 
Rubber Growers 1 Agreement 

C» Losses to Manufacturers Attendant on Market Fluctuations 
D. Disparity in Costs to Large and Small Manufacturers 

II. Changing Channels of Distribution 

A. Increasing Importance of Mail Order Houses 
B» Increasing Importance of Other Chains 

C. Increasing Importance of Oil Companies 

D. Decline of Independent Dealers 

III. Destructive Price Cutting 

A. Continued Conflict between Factions in the Industry and Trade 

B. Conflict Between Manufacturers and Mail Order Houses 

C. Conflict Between Large and Small Manufacturers 

D« The Use of Guarantees, Trade-in Allowances and Other Devices 

in Price- Cut ting 
E # Alleged Unfair Use of Superior Capital Resources to Eliminate 



I« Code Formulation 

A* The Number and Diversity of Codes Proposed by Groups and 

B. Final Consolidation of Manufacturing Codes and Drafting of 
Separate Distributing Code 

C. The Industry 1 s Efforts to Provide Price Stabilization by Pro- 
posals for: 

1« Resale Price Maintenance 

2m Allocation of Production 

3. Mandatory Cost Recovery 

4. Establishment of Price Differentials 

5. Open Price Filing 

6. Direct Price Fixing 

D. Drafting, Assent to and Approval of Codes 

II. Labor Provisions in Codes 

A. Labor Provisions not Calculated to Restore Pre-Depression 
Employment Levels 


B. Modification, Exemptions Applied for and Granted and Their 

C. High Degree of Compliance with Labor Provisions 

III. Price Stabilization Provisions Approved 

A. Conflict of Price Stabilization Proposals of Industry with 
N.R.A. Policy 

B. Ineffectiveness of Mandatory Cost Recovery in Practice 

C. Effectiveness of Open Price Piling Varies According to Char- 
acteristics of Industry Group Participating 

IV. Code Authorities 

A. Selection, Organization, and Agencies used in Administration 

B. Financing of Code Authority Operations 

C. Ineffectiveness of Code Authorities as Governing Bodies 

V. Declaration of Emergency in the Retail Tire Trade 

A. Conditions Producting an Emergency in the Trade 
l f Dissimilar Types of Distribution 

2. Unnecessary Range of Quality Lines 
3« Wide Range in Buying Prices of Retailers 
4. Price Wars and Industry 1 s Pailufe in Efforts to 
Stabilize Itself 

B. The Situation Leading to the Truce Agreed Upon Under Section 

C. Retail Tire Code Provisions for Invoking Emergency Regulations 
• D. -The Issuance of the Emergency Regulations 

E. Classification of Tires and Tubes and Determination of Lowest 

Reasonable Costs as Minimum Sale Prices 

P. Controversy Over Restriction Placed upon Guarantees 

G. Current Prices Lowered Rather than Increased by Regulations 

H. Complaints of Small Dealers 

J. Complaints of Small Manufacturers 

K. Complaints from Large Private-Brand Distributors 

L. The Demand for Differentials in Minimum Prices 

'M. Modification of Regulations and Establishment of Differentials 

N. Breakdown of Compliance and Enforcement 

0. Price Levels Not Affected by Termination of Emergency Regula- 

P t Subsequent Trend to Lower Price Levels 

I. Continued Technological Displacement of Labor 
II. Contraction of Markets and Demand 
III. Progress in Development of Rubber Substitutes 


' Preliminary Summary of 'Finding's - 

The Rubber Industry- -in -America includes the manufacture of products 
of which rubber, an import,- is an important constituent. The principal, 
products are tires, rubber footwear, and other rubber goods, such as 
hose,- belting, heels and soles., drug sundries* flooring' and hard rubber. 

The 'Industry incllides .408 establishments with 120,000 wage earners; 
and it represents a present capital investment of 580 million dollars, 
with products valued at 468 million dollars in 1933. In 1929, the es- 
tablishment:, numbered .525, the wage earners 149,000, and the capital in- 
vestment was estimated at 842 million dollars. The value of products has 
declined steadily from the high point of; 1,269 million'dollars reached 
in 1925, ._ •'■/:; -. 

,--.... I ■ ?:$r-r ••• 

Among the most '.favorable 'aspects of the. Industry have been its 
record of technioal-progress, and the situation of labor. -The Industry 
has shown ability' to. : . develop and produce merchandise In great volume, 
and. of constantly improved quality. The record of technical progress in 
tires stands as a remarkable achievement. Hourly and annual earnings 
■of "labor have been high compared to other industry. There has been a 
continual reduction in hours of work, and industrial relations have been 
harmonious o 

The problems presented by the Indus try. to N.R.A., in planning for 
industrial recovery, were its continued record of uriprof it ability, the 
mortality of small enterprises, and the concentration in fewer and 
larger establishments:, a ■.■•considerable displacement of labor due both to 
shrinkage of production and to technological change. 

The record of unpr of it ability is an outstanding characteristic of 
the InqLustiy. It has been due to wide flucutations in the supply and 
the price of the principal raw' material , crude rubber, under foreign con- 
trol and manipulation, the burdensome excess capacity and the futile dis- 
cord. and competition, evidencing "itself '■> in violent' and costly price wars 
among continually changing channel's of distribution. 

The excess productive capacity in the Industry is due to consider- 
able expansion of facilities by. the larger companies between 1920 and 
1929, the lea's "Of- export business and the construction of plants abroad 
to compete in foreign markets, an.d the decline in domestic consumption 
due to the.' depression, to changes of style and custom, and to the in- 
creased life of products in use. • 

The pressure of unprof itability, of the mortality among smaller en- 
terprises, and of destructive price-cutting was indicated by the indus- 
try^ proposals for codification. These included resale price main- 
tenance, allocation of production, mandatory uniform accounting and cost 
recovery, price differentials for specified customer classifications, 
open price filing and direct price fixing. 


. -155- 

The Industry had cooperated fully under P.R.A. and had voluntarily 
shortened hours to share the work and provide employment for more work- 
ers. In this respect, therefore, code provisions were not calculated 
to change existing standards greatly. Some re-employment did result ^ 
and earnings in the lower wage "brackets were increased "by the Codes, 
The chief -r^ohlem was to stabilize conditions of competition so as to 
provide greater security for those engaged in the Industry as workers 
or as owners. 

N. R. A. T s efforts to -provide such stability included the approval 
of uniform minimum labor standards, and of trade practice rules re- 
quiring ordinary standards of honesty in competition, and varying meth- 
ods of cost recovery, publicity of prices, and minimum sale prices in 
different divisions of the Industry. 

Because of fluctuations in the price of raw materials, particularly 
crude rubber, the Industry felt strongly that mandatory cost recovery 
required the use of the current replacement cost of materials. Crude 
rubber prices were rising rapidly. Large well-financed manufacturers 
had "bought well in advance at low prices, while small companies' re- 
sources usually permitted "buying only as needed and at current prices. 

This N, R. A. refused to approve, as a matter of policy. When the 
uniform accounting manual and cost formula was approved for' the Rubber 
Manufacturing Industry (other than tires), N« R. A. stipulated the use 
of either cost or market price on materials, whichever was the lower. 
This did not satisfy the Industry at all. The tire manufacturing di- 
vision refused to accept the stipulation and forthwith ceased any ef- 
fort to secure approval of a cost control plan. 

Open price filing was approved in several divisions and met with 
varying degrees of success as a price stabilizing device. In the 
rubber footwear division it was abandoned and the provision stayed by 
N.R.A. , due to four members refusing to comply. This case was referred 
to the Fed- al Trade Commission for determination, and the ensuing de- 
lay rendered the provision undesirable, to the complying members. In 
the heel and sole division, the industry itself requested that the pro- 
vision be stayed. Because of a price war members had completely lost 
faith in one another, in the filing requirements and in the quality of 
compliance secured. In the mechanical goods division the device was 
applied so vigorously and effectively by the Divisional Code Authority 
as to result in charges of illegal combination being brought against 
them both by II. R. A. and before the Federal Trade Commission. In the 
tire division, the partial price filing provided for proved an -entirely 
ineffective instrument for price publicity or the improvement of com- 
petitive conditions. 

The experience with mandatory costing practice and cost recovery, 
with open price filing and customer classifications, does not indicate 
that they would have been effective price stabilizing instruments in the 
tire division, had they been put into practice there. Discord and in- 
tensity' of price competition were greater in the tire division than in 
other divisions of the Industry, where these devices were tested. Diffi- 
culty and delay in enforcement with the machinery provided crippled 
their operation when the point at issue was an important one. 



In the tire division of the Industry little was done toward price 
control among manufacturers after the disapproval of the replacement cost 
principle and their abandonment of efforts to secure approval of a 
mandatory cost formula.' A separate Code for tire retailers was approved 
and an effort made to curb destructive price cutting under its provisions. 

An emergency due to destructive price-cutting was declared to exist 
in the retail tire trade and minimum prices and other regulations of 
selling practice were imposed. 

Some of the regulations were ill-advised and produced controversy 
and disrespect for the provisions in general. The restriction upon 
guarantees was stayed "but the controversy over it exaggerated the import- 
ance of the question and brought on a worse condition than existed 
before restriction was attempted. 

Minimum prices were in themselves arbitrarily arrived at, and 
based upon but a thin basis of fact. They did not protect the small re- 
tailer or the small manufacturer as they were meant to do. Large manu- 
facturers and distributors immediately made the minimum price the going 
price. This was unprofitable to the small dealer, and with one price 
for all there was a marked diversion of business to the nationally 
advertised lines of large manufacturers. This brought complaint from 
small manufacturers and private brand distributors as well. 

TTnile some increases in prices of low grade tires were brought 
about, and prices to fleet owners and governmental agencies were somewhat 
increased b3^ the fixed minimum prices, the mass of individual users 
bought tires as cheaply as or cheaper than before. 

Lack of efficient enforcement brought a breakdown of compliance 
and induced unethical and evasive practices even on the part of retailers 
not previously given to such tactics. 

The tardy effort to modify the rigidity of the program and establish 
differential levels to conform to former industiy practice resulted in an 
unwieldy and unenforceable regulation and did not improve conditions. 

The performance of Code Authorities as governing bodies was not 
encouraging. Factors which interfered with their success were competitive 
bias and partizanship, lack of time on the part of company executives, 
and in one case failure to organize properly or to secure financial sup- 
port from the Industry. 

On the whole, the codes failed to improve competitive conditions in 
the Industry. This failure was due to discord, to factional disputes and 
sabotage on the part of Industry itself, to inept and ill planned treatment 
of the outstanding need for more orderly competition on price, and to 
failure of enforcement in important cases. 

Further problems inviting attention in the Industry include: 

The probable continued displacement of labor and 
the decline of employment, due to technological change. 



Th e continued mortality of efficient small enterprises 
who are without financial resources tc^'continue competition at 
the profitless levels maintained "by large concerns. 

Static or shrinking demand for products, due to changes 
in style and custom as in footwear, or to increased life of 
the product in service, as in tires, 

The possible development of rubber substitutes, which, 
might render obsolete and valueless imch equipment and invest- 
ment, or confront the Industry with an entirely new competition. 



Table of Contents 


It Nature of the Textile Industry 

lit General Examination of the Place of the Textile Industry in the 
National and International Economy 

III. Structure 

A» Organization "by Fibres Utilized 

B. By Products Produced 

C. By Markets Served 

D. By Functions Performed 

IV. Characteristics 

A. Units - Size, Integration, etc; Geographical Distribution and 
Differentials; Value, Volume and Type of Products; Management ~ 
Labor, etc. 

V, Internal Relationships of the Textile Industry 

A* Relationships "between the Various Textile "Industries" and 

VI. External Relationships of the Textile Industry 
A. With Raw Material Trades 
Bt With Competing Industries 
C. With Customers 

VII t N.R.A. Experience with the Problem of the Relations between the 

Various Textile "Industries", and "between these and other Industries, 
under their Respective Codes. 


It Excess Capacity 

A. Seasonality of the Industry 

Bt Chronic Mai-adjustment of Production to Demand at the Market Price 
C. Lack of Balance "between Kinds of Machinery 

II. Obsolescence 

At Age and Condition of Textile Machinery 

B. Technological Improvements and their Effect on Existing Machinery 

C. Depreciation of Machinery and the "Depreciation Reserve". 

III. Efforts to Eliminate Machine-Made Evils 

A. Production Control to Control "Overcapacity" and Avert "Over- 

B. Schemes for Controlling the Installation of Additional Capacity 
and Promoting the Elimination of Worn-Out Equipment 



1. Foreign textile schemes and efforts 

2. . .American textile schemes and efforts, "both within and 

without the N.R.A. 


I. G-eneral Characteristics 

A.. Flexibility- Lack of "'Control 1 ' 
B. Elements of Price 
1.- Costs 
2. Other Elements 

II. Influences Acting on Prices (Other Than Costs) 

A. "ITjtural" 

1. Supply and demand -Production and inventories 

2. Competitive f i"b res, « cloths and products 

3. Shifts in popular taste and habits 

4. Trends of national income and- industrial activity 

5. Bargaining power of buyer and seller 

B. "Artificial" 

1. Size, or power of individual industrial units 

2. Industrial combinations and associations 

3. Maintained prices in associated industries 
4» Legal determinants or influences 

(a) The tariff, the Federal Trade Commission, the A.'A.A. , 
the I.C. C, etc. ' ' ' 

III. Textile Prices Under the N.R.A. 

A. Behavior and causes - general 

B. Code Provisions and their Operation 

1. Code provisions most directly .affecting price 

2. Code provisions less directly affecting price 

IV. Division of the Consumer 1 s Textile Dollar Between 'the Agencies of 
Production, Distribution and Financing" 


I. G-eneral Principles 

A. Usually for the Purpose of Price Control 

B. Characteristic of Large Segments of Modern Industry 

II. Characteristics- of the Textile Approach to Production Control' 

A. Reasons for the Search for a Control 

1. The Textile Industry one* usually, of "uncontrolled" price 
and production 

2. The Textile Industry one of great mal-adjustment of 
productive capacity and production to effective demand 
(a) This mal-adjustment only to demand "at a price" 

B. The Industry Convinced of its Need for Production Control 



III. CodaL Treatment of Production Control 

A* Implications of the Connection "between the -Primary Place in 
the N.R.,A.'- Structure Occupied "by the Textile Codes, and the 
Primary Place of Production Control in the Minds of the Leaders 
of the Textile Industry 

B. Three Methods of Control Utilized 

C. L'ethod No . 1 - Regulations Governing the Installation of New • 

1« Apparent and primary object the elimination of worn-out 
and obsolete machinery : 

2. Susceptible of use as, hut apparently not operative as, a 
means of production control 

D. Method Ho. 2 ~ Inventory Control ., 

1. Used only in minor Carpet and Rug Code 

2. .Apparent advantages over other methods 

E. Method No. 3 - Restriction of Machine Hours 

1. Xetails of experience with, under each textile code- 

2. Not effective as a means of limiting total production ~ 

3. Effected re-allocation of business in individual cases • 

4. Other results 

(a) On -labor - night work, regularizationof employment; 
on costs and -orices 

5. Partial -break-down due to revival of automobile trade, 
- ■ textile customer 

P. Administration of Production Control 

1. Under the N.R.A. - Methods, and lessons 

2. By ''voluntary agreements'* , industrial combinations, etc, ~ 
Methods and dangers 


I. "One of the Most Chaotic Distributing Systems in the Capitalist 

A. Channels - amount and kind of flow through each 

B. Complexity and Cross-currents 

C. Multiplicity of Steps 

D. Distributive Practices - Post-war; Evolution and changes; 
Pre-code; Codal treatment and experience 

II. Agencies of Distribution 

A* Enumeration and Description 

B. Manner of Performance of the Distributive Function 

C. Their Penetration into the Productive Function 

D. Their Penetration into the Financing Function 

E. N.R.A. Experience with the Agericies of Distribution and 
Financing ' 

III. The Control of the Textile Industry 

A. Nature and Residence 

B. The Implicptions of this Control for Legislation Resigned 
to Regulate the Affairs of the Textile Industry 




It Financial Development and Present Condition 
A« Summary : 

B. Fortunes of the Industry 

C. Industrial Handling of Assets 

II. Capital Structure - •*"■ «■. 

A. Description 
3. Factors Influencing 

III. Financial Control and its Relation to Management Control s 

IV# Fixed Capital 

V. forking Capital and Commercial Credit 
A* Description 
B.- .N.R.A. Experience With •" i . .'• 


I. Textile Lahor - Pre-Code ■ **'■'•' ' 4 ' s ' 

A. Hours - Shift Practice 
3« Earnings - Hourly, Weekly, Annual 

C. •• Conditions ,; ; .. 

1. Child Lahor , 

2. Night Work '* 

3. Lack of Unionization 

4 # Unemployment - Chronic and Seasonal *■ 

5. Work Load 

6. Productivity of Lahor 

7. Technological Changes and Relation to Lahor 

3. The Mill Village Development - Geographical Differentials 
9 # One-man and Family Shops 
10. LaJbor Disputes 

D. Lahor ! s Share in the Industry^ Income 

•■•'•■ t . .'. 

II. Textile Lahor Under the Codes • • ; \ ' ■• 

A. Lahor f s Share in Code Formulation 

3. : The Code Provisions 

C. Regulation of Lahor under the N.R.A. ''■ • • 

!• Labor ! s Participation in the N.R.A. 
2. Labor on the Code Authorities 
3.. Special Textile Labor. Boards ■" ' - ; 

D.. Condition of Labor under the N.R.A. »' • 

1. Hours, Shift practice 

2. Earnings -^Hourly, Weekly, .Annual 

3. Conditions 

(a) Child labor abolished •'■ 

(b) ' Night Work Reduced 

(c) Collective Bargaining Strengthened 

(d) Unionization somewhat Increased' 

(e) Unemployment Reduced 



(f ) Increase in Work Load Stopped 

(g) Geographical differentials Narrowed 
4* Disputes, strikes, etc. 

5. Labor* s Share in the Industry^ income under the Codes 

III* Textile Labor, Poet-Code 

A* Hours , Earnings, Employment Conditions 

IV» Residual Problems 

A* Hours and Earnings 

B# Employment •* Seasonality 

0-i The Work Load and the Effect Upon Labor of Technoligical 

D» Geographical Differentials 
E* Depressed Segments and Areas 
F. Night Work 
G* Child Labor* etc* 

H# Government participation in Control of Employer-Employee 



£• 3y Industrial Agencies or Bodies 

A* 3y Individual Industrial Units or Combinations Thereof 
33 • 3y Trade Associations and Their Agencies 

II*. 3y Governmental Bodies and Regulations 

A* The Tariff 

3. The Federal Trade Commission 

C» Taxes - Special and General 

D* The Patent and License Laws 

E» The Interstate Commerce Commission 

F* Federal Labor Legislation and Agencies 

III* By Exercise of the Spending Power 

A* The R*F*C* Loans to Textile Enterprises 

B* Government Loans on* and Actual Control of, Textile Raw 

G# Government Purchases of Textile Goods and Products Made 


IV. By the N*R.A. 

A» Antecedents of the N*R.A» Scheme in the Textile Industries 
B« Adaptation of Codal System of Control to Industry Needs and 

C» Codal Experience in Industry Government 

D» Delegation of Power, etc*, in Te-tile Codes 
E. The Aftermath; Present Industrial Regulation 


It Exports, Imports and International connections, Textile Raw 
Materials and Products 



II. Foreign Control of Textiles and Its Relation to, and Connection 
with, the U. S. Textile Situation 



I. The 1-T.R.A. Experiment vs the Previously-Existing, Partial "Laissez 
Faire" System . 

II. Choices for the Future, and Implications thereof 



1?Hg TmPILE. imuSTRY 

Prel imin ary Sir. .ima ry of Fi ndings 

Nature of the Industry 

The Textile Industry, with over 5000 plants, over a million workers 
and nearly three "billion dollars in annual production, with its consumption 
of cotton, wool and other products of agriculture, of coal, -electric power ,1 
machinery and other products of industry, and supplying necessities to 
every family and materials to almost every "business, is admittedly of 
fundamental importance in the national economy. 

The position of the Textile Industry in recent years has "been with 
certain exceptions unhealthy, with neither capital nor labor receiving 
adequate returns and, it is alleged, without equivalent "benefits even to 
the consumer. 

The Textile Industry is essentially a heterogenous aggregation of 
small units. It is characterized "by a high degree of instability of prices, 
production, employment, and membership. It has little participated in the 
trend of most American industry toward the merging of units and the growth I 
of large corporations. Structurally, the Industry is conventionally 
divided into a Silk and Rayon Textile Industry, a Wool Textile Industry, 
a Cotton Textile Industry. Actually, there is so much overlapping between J 
the functions, processes and products of the members of these various 
"Industries" that the distinctions thus set up appear largely traditional 
and artificial. The Textile Industry is essentially one. Many of the 
difficulties of the N.B.A. in dealing with it under the codes arose from 
failure to recognize that fact, or to act on the recognition when made. 
Two years of N.R.A. experience strengthened the impression that the 
natural divisions of the Industry lie rather along functional lines than 
along those of fibre utilized or product produced. 

Machinery and Equipment 

The Textile Industry suffers from a chronic maladjustment of prodiic- 
tion to effective demand. This is in part the result of and in part the 
cause of the great amount of idle machinery usually found in this Industry 
- the so-called "excess capacity". 

In addition, much of the machinery of the Industr^ is old, worn-out, 
depreciated and outdated n oy technological improvements - that is, 
obsolescent. 47.3 per cent of the looms are over 20 years old; 50 per 
cent of the spindles are over 25 years old. 

Replacement, maintenance and repair have seldom formed parts of a 
planned policy among textile enterprises. The cost of overhead on unsuit- 
able equipment eats heavily into the profits of the Industry. Worn-out or 
outmoded equipment that cannot pay its own way nevertheless exercises its 
destructive influence upon the costs and profits of its own production and 
that of more efficient machinery. 



Reserves set aside for "depreciation" , income ta:c exempt "because 
supposed to be used for maintenance and replacement, have .quite generally 
been dissipated for other purposes^. This almost universal American 
financial quirk is of unusual importance in an Industry so cursed with 
11 decayed" equipment. Diversion to other purposes of funds necessary for 
maintenance has caused high costs .and their consequent evils, "bankruptcy, 
generally unbalanced production schedules, irregular employment of labor 
and unemployment, 

Efforts to eliminate the dead weight of unsxiitable equipment have 
been quite common in foreign textile fields. Their principal manifestation 
in the United States was seen under the 1T.R.A., in the regulations concern- 
ing the installation of machinery, embodied principally in the Cotton 
Textile Code. Under these regulations the general tendency was to balance 
the installation of new productive equipment by the scrapping of an 
equivalent amount of old or second-ha.nd machinery. The trial period of 
the scheme was so brief, however, and conditions were so abnormal, as to 
render deductions therefrom inconclusive. 

Texti le Prices 

The Textile Industry represents a segment of American business where 
prices and production have been characteristically flexible and 
uncontrolled, while prices and production alike- in many of the economic 
strata above, below and around the Textile Industry .have ."been relatively 
controlled and inflexible. 

Textile prices have been greatly affected in the last decade by 
the diminishing portion of the consumer's dollar which has been allotted 
to the purchase of apparel and household goods. 

Among the elements of textile price raw material cost is usually 
the predominant item - an item greatly affected by the activities of the 
Government with regard to cotton and v/ool, and little affected by any 
textile code. Labor cost in most textiles averages close to one-quarter 
of the mill selling price, and was affected directly by the textile codes. 
Overhead cost was affected in some cases by the production limitation 
clauses of the codes. Profits have ~been of late years small or non- 
existent, but variations between individual enterprises are great. 

Textile prices are determined very largely by the state of the 
national income; and cotton textile prices especially by the status of 
industrial activity. Control of textile prices by individual units or 
industrial combinations is rare. Such control is a, possibility in wool 
textiles, and frequently an actuality in rayon yarn. 

The Textile Codes did not affect prices by any direct effort at 
control. They did affect them by such indirect methods as price filing 
provisions, production control provisions, regulations of the terms of 
sale and delivery, etc. 

Pr o d ue t i o n Control 

The Textile Industry has long been prominent in advocacy, if lacking 
in practice, of production control. ' Pre-code efforts at such control in 



the textile field were failures except in the case of the rayon yarn 
producers. The composition of the Textile Industry is indeed such that 
the securing- Or. Maintenance of collective action without some form of 
compulsion has ."been exceedingly, difficult. 

The machine-hour restrictions of the Textile Codes, ostensibly 
a form of production control, in fact did not restrict the Indus try*s 
production. They set the allowable weekly operating hours at 80, in an 
Industry which had seldom averaged over 50. The effect on the sum total 
of the Industry^ production was nil. Jor similar reasons that regulari- 
zation of employment and flattening out of seasonal fluctuations which 
had been hoped for from these regulations did not come about . 

The operations of some individual units and particular segments 
of the Industry where long hours of operation had been habitual were 
restricted. The net result in such cases was usuallj 7 " a re-allocation of 
business from the efficieiit unit to the relatively inefficient, and also 
an increase in overhead costs due to enforced idleness of plant and 

Might work was largely eliminated. 

The extraordinary curtailments in operating hours which were from 
time to time added to the code restrictions (in Cotton and Silk Textiles) 
were generally applied at a time when demand was lowest ~> hence tended 
to deepen rather than level out seasonal inequalities of production. 
These curtailments were determined on from opportunistic and short-term 
considerations; they had no ''planning" behind them. 

An alternative method of controlling production, that of inventory 
control, was used in a minor textile industry - the carpet and rug. 
Its operation has become a subject of interest in the textile field, due 
to the fact that it appears better adapted. to the. needs of individual 
units than any of the other methods tried, and yet equally capable of 
accomplishing production control. . 

The administration of the extraordinary curtailments of machine 
operations under the 1T.R.A. was not felt by- many of the guardians of the 
public interest to have been adequately supervised. 

The economic validity of production control is not proven; but the 
isolated position of the uncontrolled textile production in an economic 
scheme which is largely controlled appears anomolous. 

Distributi on and Fin ancing 

The distributive system of the Textile Industry is one of the most 
confused in American economy. The number of channels, the complexity and 
cross-currents of flow, the multiplicity of steps are amazing. The 
consumer purchasing textiles pays mainly for distribution and relatively 
little for manufacture. 

Of late years the textile distributor has become steadily more 
integrated and powerful; the mill, by contrast, progressively weaker. 
The result has been the growth of many new distributive practices and 



customs more favorable to the buyer than to the mill. The desire to 
reverse or arrest this trend accoiints - principally - for the great "body 
of trade practice provisions found in the Textile Codes, In the main 
the Codes undoubtedly strengthened the position of the Industry as against 
that of its customers and distributors. 

Textile mills on the whole do not have control over the distribution 
of their products. On the contrary the agencies of distribution have in 
general acquired much control over production. In the main this ascendancy 
has been gained by virtue of the fact that distributors are habitually the 
financiers of the mills. Those who hold the purse strings direct 
operations. In the distributor-financier is located, habitually, the 
control of the Textile Industry. The interests of the controlling dis- 
tributor are frequently not identical with that of the controlled mill. 
Moreover, this control involves little financial investment in the Textile 
Industry, little vital interest in its fortunes, and little responsibility. 

The effort of the 1T.H.A. to alleviate the ills of the Textile 
Industry was predicated on the theory- that the producing mills were masters 
in their own house; whereas, in fact the distributor-financier, whose 
operations were in general not subject to code control, was in many cases 
the real dictator of prod-action policy and employment in the mills. 


Deplorably long hours, low wages, seasonal unemployment and child 
labor were traditional^ characteristic of the pre-code Textile Industry, 
All branches were, prior to the codes, among the lowest in employee 
compensation. These conditions were especially true of the South, where 
textile labor was notably unorganized and inarticulate. 

It is not proven that textile labor received a lesser share of the 
Industry income than did labor in the average industry, but it nevertheless 
received fewer dollars than most labor. Excessive work, assignment, real 
and fancied, was another festering sore in employer— employee relations* 
Yet another was the mill village, with the feudalist ic possibilities em- 
bodied in the mill ! s ownership of the employee ! s hone, shops and places of 

The Textile Codes wrought a tremendous alleviation of some aspects 
of the labor situation, ITight work was diminished; child labor was abolish- 
ed at one stroke; employment was raised some 15 per cent (1934 over 1932); 
and unreasonable increase of work assignment was forbidden. Even so, the 
situation remained unenviable. Although the absolute increase in hourly 
wages was among the highest under the codes (nearly 65 per cent in the case 
of cotton mills) the hourly compensation in textiles remained among the 
lowest to be found in the major manufacturing industries. Hourly wages 
were increased, but hours of employment frequently were diminished; weekly 
and annual earnings consequently showed little gain. Code provisions de- 
signed to maintain the wage differentials between unskilled and skilled 
labor generally failed of their purpose. 

The regulation and control of labor relations under the codes was 
turned over to various Labor Boards, possessing equal employer and employee 
representation. These Boards met with many difficulties. Complex 


technologirA.1 problems baffled them in their attempt to solve the work 
assignment situation. It was found impossible to enforce labor regulations 
in the one-man and family weaving shops. Suspicion and ill-judged tactics 
on both sides, and la/bor's disappointment at the slow realization of its 
hopes, led to more rather than less labor unrest and bitter strikes; union 
labor led the strikes, but did not succeed in greatly increasing its ranks. 

The codes resulted in many gains for. textile labor; but the end 
result was not happy, and many problems remain. 

I n t e m at i o nal A s~o ec t s 

Our foreign textile market we have practically lost, principally to 
Japan; and that nation is threatening the domestic market in spite of tarifj 
barriers. The Webb Export Law, which in effect waives the Anti-Trust Law as 
to exports, has not stimulated textile exports as was hoped. A subsidy is 

Our foreign trade in textiles is still, however, an important though 
declining item. It amounted in 1934 to 21 per cent of our total exports 
and 15 per cent of our imports. This contrasts with Japan 1 s situation, 
where textiles form 47.6 per cent of all imports, and 62.9 per cent of all 

Our Textile Industry is internationally integrated only in the case 
of rayon yarn. 

Industrial Regulation 

Orderly/ control by conscious intention of some or all textile 
activities has 'been effected or attempted by several types of agencies 
other than the 1I.R.A. Trie influence of various other Governmental 
interventions cannot be neglected. . The Tariff has had a great influence 
on textile prices. 

The total of the R.IT.C, loans to textile enterprises has not been 
significant. The volume of Governmental purchases of textiles and textile 
products has sharply increased of late, principally through the buying s of 
the emergency relief agencies, both State and national. 

The programs embodied in the textile codes were, except for their 
labor features, almost identical with those which the trade associations 
had advocated and unsuccessfully attempted for several years before the 
advent of the 1J.R.A. Notable and successful examples of the embodiment in 
codes of previously existing industrial agencies and means of regulation 
were the Design Registration Bureau of the Silk Association and the 
arbitration systems of the Wool and Silk Textile Industry. 

I.lany other complicated regulations of business practice, however, 
were inserted in the textile codes at the insistence of the Industry. 
These provisions represented, in the main, previously untried schemes, and 
the misgivings with which N.R.A. permitted them were frequently justified 
by their inequitable workings and strife-producing results. 



The continuance in jtawar fcnd the strengthening in influence of the 
text.-n p trade y.c^)c.,iflti ons by the codes was marked in the case of Wool 
and of Cotton. 


England, Japan and others have found conscious and collective plan- 
ning a necessity of the textile situation. In this country the Cabinet 
Committee and other investigating bodies have reported the need in- textiles 
of something "beyond the laissez faire war. 

The experience of the Textile Industry under the II. R. A. for the first 
time demonstrated the possibility, under such a scheme, of- cooperative 
action, of stabilization of a highly unstable Industry, and of alleviation 
of admittedly bad labor conditions. 

The Textile Industry produces mainly basic consumer necessities - 
apparel and household goods. In no uncertain sense its production, prices 
and fortunes are affected with a public interest. Whether that interest 
can best be served by the withdrawal or loy the exercise of Governmental 
supervision and regulation is the question which must now be answered. 




Tahle of Contents 


I, Textile Industry in the Economic System of the United States 
A. Relative Importance of the Textile Industry as It is 
illustrated "by 
1. . the Volume of Employment 

2. the Productive Capacity and 

3. the .Role Played "by the Textile Industry in 
the Foreign Trade of the United Kingdom 

3. Cotton and Wool Branches and Their Relative Importance 

C. Dependence upon the Imported Raw materials 

,D. Principal Countries Importing Raw Materials 

E. British Exports of Textile Goods 

LI.. Organization of British Textile Industry 
A, Sectionalism of Industry 
3. Diversity of Business Units in Industry 

C. Lack of Industrial Integration 

D. Labor in Textile Industry 

E # Cartels .Among the Textile Manufacturers 

F. Price movements 

III, Government and Industry Measures Relating to the Textile 

I ndus try 

A. Protective Policies 

B. Preferential Tariffs 

C. Devaluation of Currency and Restoration of Gold Standard 

D. Cartel Agreements: Price Fixing, Quota Cartels, Terms of 
Sale and Minimum Price Arrangements 

E. Sharp Curtailment of Surplus Industrial Equipment in the 
British Textile Industry 

IV. Appendices 


I. Textile Industry in the General Economic System of Prance 
A. Relative Importance of Textile Industry Measured "by 

1. Its Volume of Production 

2. The Volume of Employment 

3. The Volume of Industrial Equipment 
4« Its Role in the French Foreign Trade 

II. Organization of French Textile Industry 
A. Decentralization of Industry 
3. Principal Branches of Industry 

1. Cotton Trade Manufacturers 

2. Wool Trade Manufacturers 

3. Silk Trade Manufacturers 




4. Linen Trade Manufacturers 

5. Jute Trade Manufacturers 

6. Rayon Trade Manufacturers 

C. Labor in French Textile Industry 

D, Cartelization of Textile Industry 

III. Government and Industry Measures Relating to Textile Industry 

A. Restriction of Imports 

B. Reciprocal Trade Agreements 

C. Curtailment of Production 

D. Bounties 

IV. Appendices . ; 


I. Relative Importance of the Textile Industry in Germany' 

A, Volume of Employment in Textile Industry 

B, Volume of Industrial Equipment 

C, Role of Textile Industry in the German Foreign Trade 

II. Organization of Textile Industry 
A* Lack of Industrial Integration 

B. Inefficiency of Cartels in Textile Industry 

C. The Textile Industry under the National Socialistic Regime in 

B. Labor in Textile Industry 

III. Government and Industry Measures Relating to the Textile Industry 

A. Competitive Character of German Textile Industry "before the 
Present Regime 

B. The Industry under National-Socialistic Control 

C. Restriction of Imports 

B. Substitutes for Textile Raw Materials 

E. Labor Policies in Textile Industry 

E. Governmental Prohibition of New Factories and of Extension of 

Existing Plants 
G. Control of Prices 


I. Relative Importance of Textile Industry in Italy ■ 

A. Volume of Employment in Textile Industry 

B. Capital Invested in Industry 

C. Role of Textile Industry in the Italian Foreign Trade 
B. The Extension of the Italian Textile Industry 

II. Organization of Textile Industry 

A. Economic Concentration in Industry 

B. Diversity of Business Units 

C. Labor in the Italian Textile Industry 

D. Textile Industry in the "Corporate State" 

III. Governmental Measures Relating to Textile Industry in Italy 

A. Organization of State Control 

B. Restriction of Imports 

"" ' -172- 

C. Tariff Policies 

J). Guhofcltntes for Raw Materials 

E. Measures to Stimulate Exports, 

F m Labor Conditions in Industry '. 

G> Control of Normal Time of Work 

K. Hational Schedule of Minimum Wages 

' I* Equitable Distribution of the Volume of Work Available 

J» Measures to Reduce Costs. 

K. Elimination of Redundant Industrial Equipment 

L. Measures for the Control of Trade 

IV. Appendices 


I* Importance of Textile Industry in Japan 

A. Tremendous expansion of the Japanese Textile Industry 
33. Outstanding' Position of Textile Industry in the 

Manufacturing System of Japan 

It Value of Textile Production 

2. Volume of Industrial Equipment 

3. The Textile Industry in Foreign Trado of Japan 

4. The Dependence of Japan upon Imported Raw Materials 

5. Exports of Textile Goods in Japan 

II. Organization of the Textile Industry 

A. High Industrial and Inter-Industrial Integration in Japan 

B. Lack of Organization of Japanese Labor 
C # Labor Conditions 

1. Hours of Work 

2 # Wages 

3. Productivity of Labor 

4. Multiple Shift System 

D. Price Movements 

E. Textile Industry in the Recent Depression 

III # Governmental and Industry Measures Relating to the 
Textile Industry 

A. Unbeatable .Competitive Position of Japanese 
Textile Industry 

B. Protective Policy in Japan 

C. Reciprocal Trade Agreements 

D. Depreciation of Currency 

E. Boycott of Japanese- Textile Goods by China and 
of British India, by Japan 

P. Measures Intended to Regulate Textile Production 
G. Governmental Supervision over Textile Export Trade 
in Japan 

IV# Appendices 




The purpose cf this survey has been twofold: 

(a) To trace the conditions of the textile industry in some im- 
portant textile producing countries, 

(b) To ascertain the ways and means used in these countries for 
the economic rationalization of the industry. Attention 
has "been paid particularly to the role of cartels, and to 
their effectiveness as a device for economic stabilization 
in the , textile field. 

Characterization of /the textile industry in single countries has "been 
Biade on the following points: 

(a) The relative importance of the textile industry in the gen- 
eral economic structure. 

(b) The role played "by the textile industry in foreign trade 

(c) Organization of the textile industry. 

(&') Government and organized industry measures, particularly in 
the years of depression. 

The relative importance of the textile industry in the general struc- 
ture of the countries under survey may be well illustrated, for example, by 
the volume of employment: 



Countries Year 

Per Cent 

Basis of Comparison 
















Total Number of Occupied Persons 

Total Number of Occupied Persons 

Total Industrial Employment 

Total Industrial Employment • 

Total Number of Factory Workers 

The. data revealing the role played by the- textile industry in the 
foreign trade of the countries surveyed are still more significant: 











Average 1920-33 
Average 1928-35 

Value of Textile Goods as Percentage 

of the Total Value of Foreign Trade 

Imports Exports 

(Per cent) 


er cent) 











The textile industry is the most important exporting industry in all 
the countries surveyed with the exception of Germany, where it ranks third. 
The value of the exports of the metal and chemical industries were greater 
in Germany than the value of exported textile goods. Thus the textile indus- 
try reflects more than any other the dislocations in international trade 
"brought in by the depression. 

The cotton and wool "branches are the most important in the textile in- 
dustry in all the countries under discussion, while the silk section plays 
a considerable role in Japan and France. The growth of rayon production has 
"been particularly rapid in Japan and in Italy. 

A wide technical and economic dispersion of textile production, di- 
versity of "business units and lack of standardization of the good produced 
characterize the British, French, German and Italian textile industries. As 
a rule only the finishing trades are more integrated and more highly ra- 
tionalized. The rayon industry, on the contrary, is efficiently organized in 
all the countries mentioned and is under the control of the powerful Inter- 
national Rayon Cartel. 

Organization of the textile industry in Japan is exceptionally good. 
Absolutely modern industrial equipment, low costs of production, and the 
supreme industrial and inter-industrial integration of the Japanese manu- 
facturers, have assured the strong competitive position of the Japanese tex- 
tile industry in the international market, and explain the spectacular ex- 
pansion of Japan in the textile field in the years of the depression. 

Under the conditions of the present dictatorial political regimes the 
German and Italian textile industries have "been taken under the strict con- 
trol of the state. Rigid control of the textile production, of the trade 
and of prices is an actuality in these' countries. It is not yet possible, 
however, to make any definite conclusions as to the effectiveness of the 
German and Italian pattern. 

Though a very clear tendency toward economic concentration is trace- 
able in the British, French, German and Italian textile industries (the 
last two taken before the present regime), they still remain substantially 
competitive. The Japanese industry is under the all embracing control of a 
few industrial magnates. 

Due to the lack of industrial integration and to a wide diversity of 


.-. -175- 

business units, the car tels # though numerous, are strikingly inefficient and 
at the best short-lived organisations, in the United Kingdom, Prance, Italy 
01^1 t'.\*«,n i n itermmxy, except in the finishing and rayon "branches. The car- 
tels of the Japanese huge industrial combines, on the contrary, have proved 
to he stable, effective and omnipo-tent. 

The world-wide diffusion of textile production and the resulting heavy 
dislocations - considerably aggravated by the depression since 1929.- are the 
two outstanding characteristics of the present status of the textile indus- 
try. On such a general background the definite decline of the British tex- 
tile industry and the gigantic expansion of the Japanese production are the 
most impreer.ive and seemingly fchf* most important features". 





Table of Contents 



I. Assets and Earnings 

II. The Tendency of the Large Corporations to Engage in Banking and In- 
vestment Operations' 

III. The Separation of Management and Ownership 

IV. The Remuneration of Officers and Directors 

V. The Domination of the Large Corporations 

VI. Control of Price Structure 

VII. Social Responsibility 

VIII. The Trade Associations 

IX. Comparisons with Other Industry 


I. Character of Labor 

II. In Leaf Marketing 

III. In the Cigarette, Snuff, Chewing and Smoking Tobacco Industry 

IV. In Cigar Manufacturing 

V. In the Distributing Trades 

VI. Mechanization 

VII. The Unions 


I. The Loose Leaf Tobacco and Auction Warehouse 

II. The Short Marketing Season 

III. The Different Methods of Buying Cigar Leaf 

IV. Readjustments in Demand for Various Types of Tobacco 

V. Research Problems 




I. The Importance of Tobacco as an Export Commodity and the Growth of 
Foreign Competition 

II. The Economic Significance of Tobacco Exports 

III. The Relation of Trade Barriers to Our Export Trade 


I. The Unusual Importance of the Industry as a Source of National In- 
come Through Excise Tax Revenue 

II. Increasing Trend of State Taxation 
III. Comparative Tax Yields on Different Types of Tobacco Products 
IV. Processing Taxes 

V. The Relative Merit of Different Methods in Tobacco Excise Taxation 
VI. Import Duties on Tobacco Leaf 

I« The Small Leaf Dealer 
II. The Economic Position of the Small Manufacturer 
III. The Position of the Small Distributor 

I. The relation of the Manufacturer and Distributor 
II. The Wholesale Tobacco Trade 
III. The Retail Tobacco 'Trade 
IV. Price Regulations under the Code 
V. Breakdown of Labor Standards 
VI. The Necessity for Some Type of Government Regulation 




I. Conditions Prior to the president's Reemployment Agreement in 
the Seven Divisions of this Industry 



II. The Response of the Industry to the Code Proposals 
III. Appraisal of the Advantages under the Codes 
IV. Post-Code Conditions 

V. The evident Necessity of Some Porm of Government Regulation to 
Restore Definite Advantages of Code Period 


Preliminary Summary of Findings 

I. Definition 

II. Summary 

1. The development of the quasi-public corporate structure in the 
Tobacco Industry, compared with all industry and certain other 
specific industries. Its social responsibilities. 

2. The economic and social conditions surrounding labor, based on 
color, sex, and geographic location; comparison with other in- 
dustries, primarily the Textile Industry. The development of 
mechanization and the effects of technological displacement. 

3. The problem of Integration 7 T ith .Agriculture. 

4. The record of Tobacco exports and the development of foreign coin- 
petition and trade barriers 

5. The unusual importance of the Industry as a source of. national 

income through tax revenue. 

6. The small comioany: Its competitive position and its place in 
the economic structure of the Industry 

7. Distribution: The inter- dependence of manufacturer, wholesaler 
and retailer and the specific problems of the loss-leader and 
price fixing 

8. The status of the consumer; His influence in changing trends 
within the Industry and the importance of trade promotion media* 

9. The dependence of the South-Atlantic States on Tobacco and 
Cotton both in Agriculture and Manufacture 

10. Advent of the Codes; their operation; changes effected under 

code control and the continuing influence" of code experience on 
Industry conditions and policies • 

II. Statement of the Problem ; Outline of ten chapters covering the sec~ 
tions of the summary 


I. Assets and Earnings ; The growth of assets, and income and its dis- 
position — sales volume — from the dissolution of the American To- 
bacco Company in 1911, when available, for groups, including the Big 
Three (l) (2), six other companies (l), three snuff companies (l), 
four cigar manufacturing companies (l), twenty-four cigar manufactur- 
ing companies (l), three leaf tobacco companies (export) (l), indivi- 
dual companies (2) — and a segregation of the tobacco industry by 
total assets classes (l). 


(1) Income Tax Unit, Bureau of Internal Revenue 

(2) Prom published sources, including Moody 1 s and Standard Statistics 

II. T he Tendency of the Larae Corporations to Engage in Banking and In- * 
vestment Operations ; The accumulation of surplus beyond capital re- 
qiiirements — financing expansion through earnings. 

.II. The Separation of Management and Ownership; Its steady increase — 
the voting rights conferred by stock ownership held by the officers 
and the directors — the employment of the legal device of non-voting 
stock — the illustration of the Big Three. 


IV. The ?,e mime rat ion of Officers and Direc tors; From salaries, from 

profit sharing, and that remuneration "based on holdings of company 
securities which permit special distribution of certain net income. 

V. The Domination of the Large Corporations: Certain ;ionor>olistic 
trends in the -purchase levels of tobacco le.^.f , the occasional up*. 
ward ^r ice movement of finished product, particularly cigarettes, 
the effect of heavy expenditures for advertising in development of 
highly competitive brands •-— special allowances and free deals, 
used in breaking' down price levels or for the greater advantage of 
large wholesalers- or retailers, particularly the direct buying re- 
tailers, such as large department and chain stores — the methods 
employed in attempting to reduce or eliminate- the competition of 
cigarette brands and other tobacco products introduced by small 
coy.roanies — the difficulty of new competition due to the large 
amounts of capital required for plant e qui omen t, advertising and 
excise stamp tax expenditures. 

VI. Control of Price Structure ; Stability of demand and lack of .depend- 
ence on wholesalers and retailers for sales promotion with conse- 
quent narrow profit margins to distributors — their failure to de- 
velop good-will other than through their direct retail buyers. 

VII. Social Responsibility ; To labor, the community, the national 

economy and the industry itself. The v/ide variation in recognition 
of these responsibilities -- the marked improvement in such recogni- 
tion oy certain corporations. 

VIII. The Trade Associations ; Their lack of cohesion — the lasting ef- 
fect of the Supreme Court* s dissolution of the Trust — the lack of 
an-/ research organization covering primarily the. scientific study 
of the dsging of tobacco or the betterment of manufacturing methods 
or trade relations. 

IX. Corroarisons with other Industry ; Covering total assets, certain 
items of liabilities and income for thirteen industry groups, in- 
cluding; food products (including beverages), textiles, chemicals, 
all industrial groups (except agriculture and rela.ted industries 
group and finance group), all manufacturing groups, all industrial 
groups in the United States, agriculture and related industries, 
the finance group, the motor vehicle group, factory machinery, 
agricultural machinery, food and kindred products and liquor and 
beverages. Marked variations in earning records during the de- 
pression period and the unusual showing of the tobacco group at 
that time. 


I. Character of Labor: Tobacco labor not a homogeneous unit — but 
composed of at least three groups, unrelated unless by common low 
wages — (l) cigar workers, (2) workers in tobacco wholesaling 
and retailing, and (3) workers in the vertically related activities 
of leaJT marketing, processing, and manufacture into cigarettes, 
snuff, chewing and smoking tobacco. 



II. L 3 af Marke t ing ; Loaf marketing, and processing by leaf dealers, a 
purely seasonal employment — dovetailing to a marked degree with 
"farm employment — and characterized, especially in the leaf-dealer 
"branch, by predominance of marginal and sub-marginal negro labor — 
with ir ages, low on these accounts, limited also "by fact that export 
stemming (a primary leaf-dealer occupation) can "be done "by cheap. 
labor abroad. The effect of this low-paid leaf-dealer employment 
on manufacturing employment. 

III. The Cigarette, Snuff, Chewing and Smoking Tobacco Indust ry : L o cal- 
ization of tobacco (particularly cigarettes) manufacture — over- 
ruling importance to particular communities — and as a market for 
negro and for white female labor — relation to other local employ- 
ment, cotton textiles, hosiery, farming — the average level and the 
range of wage rates and of earnings — differentials among the giant 
corporations, the intermediate, and the small companies — company 
welfare activities — tobacco communities and relief — feasibility 
of improving labor's position — reaction on other local industries 
and on mechanization ■ — accomplishments under P.R.A. and N.R.A. 

IV. In Cigar Manufacturing ; Position of the cigar grouo — marked re- 
gional sore spots (York County versus Tampa) — accentuated dis-. 
Placement in recent years of hand workers by machine workers — Of 
males ''ay females, with opposition of males to mechanization — the 
effect of the cheap cigar on competition and wages (labor costs 
assuming importance not found in cigarette manufacture) — in- 
fluence of the P. II. A. and the codes. 

V. In the Distributing Trades : Present position of workers in tobacco 
wholesaling and retailing, with post-code breakdown of wage and hour 
standards — metropolitan versus other areas, 

VI. lie chan izatio n; Current and potential mechanization of the cigarette 
and the cigar industries and among leaf dealers. 

VII. The Unions ; The unions in the tobacco manufacturing and the cigar 

manufacturing industries. Scope and effect of collective bargain- 

Source s; 

1. Pield Surveys loy .Bureau of Labor Statistics, Department of Labor, 

The Cigarette, Snuff, Chewing and Smoking Tobacco Industry. T- r o 

surveys, during code and post-code. 

The Tobacco Leaf Dealers (Export). Two surveys during code and 


The Cigar Manufacturing Industry. Survey not yet completed. 

2. Questionnaire to Wholesale Tobacco Trade. 


I. The Loose Leaf Tobac c o and Auction War ehouse; Certain unfair trade 
practices particularly the subsidizing of truckers by warehouses - 
the wide range in price shown on identical government gradings, and 
the probable necessity of mandatory requirements to force the use of 


government grading - the many unsatisfactory characteristics of the 
--resent auction system and the possibility of revolutionary changes 
by government grading - a similar possibility of price stabilization 
and a simplified arrangement for governmental price control - the 
defects of the Maryland auction method and the resultant loss im- 
posed on Maryland farmers. 

II. The Short Marketing; Season ; The possibility of its extension and 
the consequent elimination of the present market glut, 

III, The different methods of buying Ci^ar Leaf ; The practical control 
of shade groum Connecticut wrapper by farming corporations - the 
direct purchase by large manufacturers of Ohio, Pennsylvania, and 
other filler types - the dependence of small manufacturers on leaf 

IV. Readjustments in Demand for Various Types of Tobacco : The increase 
in financial prosperity in area.s where cigarette leaf is grown, and 
a corresponding decrease in those sections devoted to other types 
of tobacco leaf - other contributing factors particularly foreign 
production of competitive types of leaf - the substantial increase 
in acre yields. 

V.; Re search Problems : The advisability of cooperation by the manu- 
facturing industry with agriculture in scientific research on 
methods of growing and curing different types of tobacco. Present 
methods unchanged for- long periods - the possibility of further 
development of increased export business and improved blends, 


I, The Importance of Tobacco as an Export Commodity and the Growth of 
?o reign Competition ;. Tobacco, our oldest export commodity, is to- 
day the second in rank among agricultural exports. Except for in- 
creases to Great Britain due in part to readjustment of exchange 
rates, exports are showing a general downward trend, caused by in- 
creased world production, unfortunate economic conditions, unfavor- 
able exchange rates, shifts in smoking tastes, the growing spirit 
of nationalism, high prices caused by crop shortage and control, 
and lack of knowledge by American leaf exporters of conditions now 
existing in importing countries, 

II. The Economic Significance of Tobacco Exports ; . The problem of sav- 
ing markets to care for surplus production over domestic needs - to 
prevent consumer change of taste through replacement of our leaf by 
foreign types - to continue this oldest export commodity in the fore- 
ground in international trade channels because of the direct depend- 
ence of the tobacco growing states on continuing foreign markets. 

III. The Relation of Trade Barriers to our Export Trade ; The control of 
imports in countries where tobacco is a national monopoly - the 
greater opportunity in other countries - the preferential duties, 
as in England our largest customer - exchange restrictions - the 
setting of import quotas - the influence of barter and compensation 
agreements .between foreign nations, 




I . Tiie Un usual Importance of the Industry as a Source o f National In- 
cone through excise Tax Revenue ; Over a period of many years the 
amount of tax yields on tobacco products showing its increase and 
comparative stability; its proportion to excise taxes derived from 
all sources; a comparison with other important' sources of excise 
tax revenue including: corporation and individual income taxes, 
capital stock taxes, estate and gift taxes, liquor taxes, and their 
renewed importance since prohibition repeal, stamp taxes, manufactur- 
ers 1 excise taxes, covering particularly the automobile industry, 
and gasoline. 

II. Increasing Trend of State Taxation ; The effect of this additional 
taxation in curtailing tobacco consumption and the impairment of 
tobacco products particularly cigarettes as a source of national 
revenue ~ other local taxation - bootlegging of cigarettes, 

; 1 1 . Comparative Tax Yields on Different Types of Tobacco Products : The 
outstanding importance of cigarettes - the reasons for decline in 
tax yields on cigars and chewing and smoking tobacco - the stability 
of tax revenues on snuff, 

IV. Processing Taxes ; The direct effect on 10 <£ cigarette competition, 

in combination with higher prices for tobacco, and increase in labor 
cost - similarly, the lesser effect in the snuff industry without 
competition for its tobacco types - the relative importance to large 
and small manufacturers. 

V. The Relative Merit of Different Methods Employed in Tobacco Excise 
Taxation ; The graduated tax on cigars based on retail selling 
prices - the flat tax of $3 per 1000 small cigarettes, without re- 
ference to selling price - the flat tax per pound on certain other 
tobacco products, notably smoking and chewing tobacco, and snuff. 

VI. Import Duties on Tobacco Leaf ; The considerable use of Turkish 
tobacco in cigarettes selling 2 packages for 25^ - cigar leaf im- 


I. The small Leaf Deal er; His influence in the determination of prices 
paid the farmer — the trend toward concentration within the leaf 
industry — marked decrease in the number of small dealers — the 
grouping around certain large companies through partial ownership 
of many former small independents — the wage and hour problem. 

II. The Economic Position of the Small Manufacturer ; The higher cost 
of indirect purchase of leaf through dealers — the higher cost of 
manufacture due to less mechanization — the right of labor to a 
decent wage from manufacturer, large or small — the inabilitjr to 
average tobacco cost over several years with consequent heavier cost 
penalties in rising tobacco markets — the limited territory for 
distribution — the effect of governmental regulation including the 
additional cost of the processing tax. 



III. The Position of the Small Distributor ; The growth of the chain store 
with its wider margins from direct 'buying — the development of un- 
fair trade practices discriminating against the small distribu- 
tor — the necessity of additional lines of mercnandise — the marked 
improvement from minimum pricing under N. R, A, except in the case 
of the sub- jobber -- the present heavy mortality among all classes of 
small distributors, particularly in the metropolitan areas, 


I. The Relation of the Manufacturer and Distributor ; Direct sales by 
the manufacturer at the same discounts given the wholesaler to the 
larger retailers of high credit — the consequent elimination of the 
highest class of business from wholesale channels. The apparent in- 
difference of the manufacturers to the profit position of distribu- 
tors, this based on demand for brands developed through advertising 
channels — the resulting lack of good will and the effect on gross 
margins allowed wholesalers. Price discrimination evidenced by ad- 
vertising allowances and free deals offered to direct retail accounts 
and allowances to selected wholesalers and similar advertising al- 
lowances and free deals offered selected retailers — the resulting 
hardship on other wholesalers and smaller retailers. The opportunity 
developed through this lorice discrimination for loss leaders and 
price cutting. The former use of these methods to reduce the sales 
of competitive brands, particularly the 10^ cigarettes. The marked 
difference in use of the above trade practices by certain large 
manufacturers — the wide- spread effect of such action by any one 

II. The Wholesale Tobacco Trade ; The jobber buying direct from the 

manufacturer and selling to retailers and to sub- jobbers who in turn 
sell the small retail trade. The necessity for both jobber and sub- 
jobber to handle other products with larger profit margins to aid in 
volume and comioensation for the lower profit margins on tobacco. 
The irregular discounts given both to sub-jobbers and retailers. 

III. The Retail Tobacco Trade 

A. The spread of tobacco product merchandising throughout all dis- 
tributing and service trade outlets estimated to be more than 800,- 
000 in number — the cigar counter has largely replaced the cigar 
store. Cigar store chains have materially changed their character 
by the addition of novelties, sundries and other products. Cigar 
stores now are limited in number and are found almost without ex- 
ception in the metropolitan areas. 

B. The Increasing Use of Cigarettes as Loss Leaders ; This plan a 
definite policy of the grocery and drug chains and department stores 
during the period of their greatest growth. Continuous demand by 
both sexes made cigarette purchasers extremely sensitive to price 
cut s . 

C. The Pre-Code Condition ; The most serious problem confronting 
the trade was the extensive use of cigarettes as loss leaders. Evi- 
dence before the Federal Trade Commission shows the then policies of 
various manufacturers relative to gifts, rebates, advertising allow- 

- -185- 

for the prevalence of the practice*, The sales of cigarettes at a 
loss commonly regarded as advertising expense, justification for 
which was found in increased general store patronage, 

IV. Price Regulations Under the Cod e;' Based on percentage markups of 
the manufacturers' net and resulting in establishing minimum retail 
prices on all brands on a "basis equal to prices then prevailing in 
the tobacco chain stores and in most of the independent; tobacco out- 

A. Effect of Cigarette pric e Regulations ; Stabilization of the re- 
tail trade and loss in sales volume by outlets formerly selling be~ 
low the minimum prices established, A gain in sales by the tobacco 
chains. Ho consumer resistance apparent,- No serious difficulties 
experienced with compliance . Price regulations were contrary to 
N3A economic policy and approved over the objections of the Division 
of Research and Planning and the Consumers Advisory Board. No harm- 
ful effects apparent during the life of the Code, Increased cost 
to consumer off set by the resulting stability accruing to both 
wholesale and retail trades. 

L. P ost Code Cond i tions ; Demoralization in cigarette r>rices and 
those of other tobacco products occurring sporadically throughout 
the metropolitan centers. Realization of profit possibilities in 
tobacco products has generally prevented the starting of ^rice cut- 
ting by the chains. This particularly true of retail outlets with' 
large volume of cigarette sales-. Profit ^margins of both wholesalers 
and retailers have decreased or disappeared in certain localities. 
Conditions in some centers extremely unsatisfactory as 1935 closes. 

V, Breakdown of Labor Standards ; Due to disappearance of profit. 

VI. The Necessity for Some Type of Government Regulation 


No apparent resistance to cigarette prices of two packages for 
twenty— five cents — consequent apparent satisfaction with present 
6(£ tar. per package — the impossibility of determining the present 
influence of advertising on additional cigarette demand — striking 
changes in demand for various brands result from better advertising 
standards — immediate appeal of 10^ cigarette on increase of price 
differential charged by four large cigarette companies — dro'o in 
10 {5 cigarette sales and in hand rolled cigarettes as general condi- 
tions improved — dislike of odd-priced packages — the distinct 
possibility of changes in taste and in consequence a similar possi- 
bility of change in demand for certain blends. 


The comparability of these two crops in volume and value — 
the relative lade of other agricultural production or other manu- 
facturing — the large export percentage of flue-cured tobacco 
(approximately 55^ in 1934) and the export of cotton representing 
approximately 55$ of its total crop in 1934 — the effect of the 
gradual reduction in exports on the economy of these states — the 
steady concentration of manufacture of both these products in this 


i- . . 
section — the additional growth of other textile manufacture, "both 
silk and rayon — the necessity for diversification in agriculture — 
the real menace of existing conditions. 


I . Conditions Prior to the Presidents Reemployment Agreement in The 
Seven Divisions of this Industry ; Labor and Trade Practices. 

II. The Response of the Industry to the Code Proposals 

III. Appraisal of the Advantages Under the Codes . 

IV. Post- Code Conditions ; Outstanding examples of continuation of la"bor 
standards in the Cigarette, Snuff, Chewing and Smoking Tobacco Indus- 
try — continued compliance with labor standards by certain manufac- 
turers of cigars — breakdown of latbor standards oy small manufacturers 
and the Cigar Manufacturing Industry, with exceptions noted above — 
the continued highly unsatisfactory labor conditions in those divi- 
sions of the industry that had no codes (the Leaf Tobacco Dealers and 
the Cigar- Type Leaf Dealers) — the general breakdown of fair trade 
Code standards and the demoralization resulting, particularly in me- 
tropolitan centers, for both wholesale and retail distribution. 

V. The Evident Necessity of Some Porm of Government Regulation to 
Restore Definite Advantages °f Code period. 





Table of Contents 

I. The Objectives of the Study 

A. The Creation of a Compendium of Facts concerning These Trades 

1. The Need for Such a Compendium 

2. Availability of Data from Outside Sources 

3. The Value of NM Materials 

B. Appraisal of NRA Experience 

C. Guidance in Future Regulatory Efforts 

II. The Llethod of Studv 

km Reasons for Concentrating on This Group of Trades 
B # The Study Outline Employed 
C# The Staff Organization 

III. 'The Sources Consulted 
A. Library Hate rials 
3, LIRA Materials 
C. Field Sources 

1. I^roe of Materials Available Outside of Washington 

2. The Extent to TThich These Sources were Consulted 

IV. The Present Status of this Study 
A. Progress Made to Date 
B« The Further Procedure Desirable 

V. The Drafting of the Preliminary Report 

A. Order of Preparation of Segments 


I. The Extent of This Industry 

A f Number of Establishments 

B. Volume of Sales 

C. Number of Employees 

D. Extent of Payrolls 

II. Classification of Establishments 

A. The "Trades" 

B. Classification by "Size" 

III. The Proposal of Codes by These Trades 
A, The Trades which Submitted Codes 
3. The Problems of Overlapping 

C. Horizontal versus Vertical Codification 

IV. The Plan of Horizontal Codification 
A. History of Its Adoption 
3. Decree of Adherence 
-i- C. Degree of Divergence 




I. The Alternative Sources of Authority 

A. Indirect Approaches to the Problem 

Taxation Power 

Postal Regulation 

Demerits of These Approaches 

B. The Commerce Clause 

Powers Delegated to Congress 

Alternative Methods of Establishing Jurisdiction 

II. Evidence of "Actual" Interstate Commerce 

A. Data concerning Actual Trading Ranges of Specific Concerns: 

1. 59 Denver wholesalers 

2. 55 Wholesale dry goods houses 

3. 25 General Electric Company distributors 

4. 30 Typical hardware wholesalers 

5. 12 Typical Paint Merchants 

6. 4 Typical Chemical concerns 

7. 53 Typical wholesale stationery merchants , ;, 

Miscellaneous others 

B. "Commonly Accepted" Trading Areas of These Trades: 

1. China and Glassware 

2. Drug 

3. Dry Goods 

4. Electrical 

5. Hardware 

6. Millinery 

7. Paper 

8. Upholstery and Decorative Fabrics 

C. Mileage out of Each of 18 Cities Travelled by Salesmen of 4 
Wholesale Trades: ' 

1. Electrical Supply 

2 . Hardware 

3. Paint and Varnish 

4. Radios 

III. Evidences of Effect of Interstate Operations on the Free Plow of 
Interstate Commerce 

A. Effect of Wholesale Operations on Commerce of Manufacturers 

B. Chain Structure in Wholesaling 

C. Instances where Jobbers Act as Direct Agents 

IV. Evidences that Interstate Commerce of Wholesalers is Inextricably 
Intermingled with Intrastate Commerce, 

V. Precedents for Federal Regulation 

A. Federal Trade Commission Codes 

B. Federal Desist Orders 


I. Extent of its Jurisdiction 
A* Trades Encompassed 

B. Number and Location of Establishments 

C. Capital Invested 

D. Sales of the Trades 

E, The Trades as Employing Factors ■ 

II. The Sponsoring .Trade Associations 

A. Representative Character 

. 13 • Relationship to Code Authorities 

!II« Plan of Administration 

A# Tne General Code Authority 

B. The Supplementary Code Authorities 

IV. Adinini strative Difficulties 
A # Problems of Overlapping 
B # Problems of Compliance 

C. Problems of Financing 


I. Reasons for Obscurity 

A« Indirect Relationship of Labor to Competition in Jobbing 

B # Replaceability of These Workers 

C. Comparative Lack of Geographical Concentration 

D» Absence of Trade Unionization 

II. Sources of Information 
A» Older Sources 

B* Contribution of the NRA Experience 
C* Limitation of the Sources. 

III. Effect of the Depression on Employment 

IV. Labor Objectives of the National Industrial Recovery Act 

V. The Problem of Reemployment 
A* Alternative Methods 

1« Store Hour Limitations 
2% Work-week Limitations 
3. Difficulties Offered by Both 
B # General Attitude of the Trades toward Hour Limitations 
C# Prevalent Employee Hours at the Time of the President's Re- 
employment Agreement 
D* Substituted Hour Provisions in the President' s Reemployment 

E. Reemployment Effected by the PRA 
E* Hour Provisions in the General Wholesale Code 
G> Effect of Code Hour Provisions on Employment 
H # Supplementary Code Hour Provisions and 'Their Effect 

VI • The Problem of Increasing Purchasing Power 

A. Effect of the Depression on Purchasing Power on Wholesale 
Trade Wage Earners 

B. Amount of Wages in Wholesale Trades 

C. PRA and General Wholesale Code Provisions Pertaining to Wages 

D. Effect on Weekly Wages of PRA and the Code 

' "E« Wage Provisions in the Supplementary Codes and Their Effects 



VII. Employee-Employer Relations 

A. Prevalence of Trade Unions 

B. New Unionization under ERA 

C. Collective Bargaining under Section 7(a) of the NIRA 

VIII. Child Labor in Wholesale Trades 

A. Extent 

B. Code Provisions Affecting Child Labor 
1« Prohibition of Labor of Juveniles 

2. Restriction of Hazardous Occupations to persons over .18 
years of Age and Analysis of These Occupations 

IX. The Regulation of Labor Practices 

X. Evidences of the Effect of the Sche enter Decision on 
A a Wages 
■'. B. Hours 

C« Employment 



It The Importance of These Issues 

II. Changes in the Status of Wholesale Merchants 

III. Underlying Reasons for These Changes . 

A. Integration of Retail Buying Power 
B # Increased Bargaining Povrer of Large Consumers 

C. Increase in Large Manufacturing Enterprises 

Da Growth of Dissatisfaction of Producers with "Wholesalers } Serv- 

la Increase of Hand~to-Mouth Buying by Wholesalers 
2. Increase of Branded and Advertised C-oods 

Eg Emergence of Distribution-Cost Consciousness 

IV. The Extent to which Wholesalers have been Circumvented i.n Distribu- 
tion • 

A. In Commerce Generally 

B. Detailed Trade-by- Trade Analysis 

V. Hie Struggle of Wholesalers to Survive 

A. Integration of Wholesaling with Manufacturing 

B. The Innovation of Wholesaler- Brands 

C. Integration of Wholesaling and Retailing 

D. Expansion of Strictly Wholesaling Services 

E. "Selective 11 Selling 

F. Cooperative or Group Activities 

1. Establishment of Chains 

2. Educational Activities by Trade Associations 

3. Boycotting of Producers 

4. Restriction of Trade Association Membership 



VI* The Emergence of New Types of Wholesalers 
Am Specialty Distributors 
B. Limited Sanction Wholesalers 

VI I • The Effort to Enlist the Aid of the Federal Government 

At The "Differential" Provision in the General ".Wholesale Code 
1« History 

2. Efforts to Effectuate 

3. Economic Implications 
B. Code Definitions 


I, Methods of Selling 

A# Use of Salesmen 

B. Use of Advertising 

C. Use of Catalogues 

II, Basis of Sales 

A* Outright Sales 

B« Consignment Selling 

C. Sales on "Memoradum" 

D. Privilege of Return 

III. Pricing Practices 

A. Methods of Pricing 

l f Manufacturers' List Prices 

2. Discount Schedules 

3. Open Market Operating 

4. Secret Bidding 

B. Price as a Competitive Weapon 

1. Wilfully Destructive Price Cutting 
2» Sales he low Cost 

C. Devices to Stabilize or Control Price 
1« Retail Price Maintenance 

2. Open Price Piling 

IV. Terms of Sales 

A. Purposes of Practices 

1. Inherent Purposes 

2. Abuses 

B, Credit terms 
C» Datings 

D. Shipping terms 

V. Rebates and Allowances 
A. Open Practices 

1. Trade-in Allowances 

2. Advertising Allowances 

3. Premium Offers 

4. Deals 

5. Others 

B % Secret Practices 




I. Financial Status 

A. Increase of Sales 

3. Decreases in Failures 

C. Changes in Operating Ratios 

II. Status of "Small Business" 

A. Analysis of the Trades by Size of Concerns(*) 
3« Factors Affecting Small Concerns 

III. Freedom of Competition 

A« Degree Existing Prior to Codes 
B« Direct Effect of the Codes 
G« Indirect Effect of Codes 

IV. Attitude of the Trades tovrard Governmental Regulation 
A» Prior to Codes 
3. During Codification 

C. Today 

(*) By "Size" is meant Concentration of Sales 




Prelimi nary S umma ry of Findi ngs 

While wholesale merchants in almost all trades have lost ground as 
factors in distribution during the past three decades, in the aggregate 
they continue to constitute a large and important industry. In 1933 whole- 
salers operated 76,856 establishments} they had invested in goods throughout 
the year capital in excess of $1,600,000,000, and they paid $861,501,000 in 
wages to 600,847 employees. 

The- Industry is composed of groups known as "trades* n The establish- 
ments engaged in the latter purchase and carry in stock related types of 
merchandise, which they in turn sell and distribute to retailers, as well as 
to industrial, commercial and institutional customers. Retailers "buy almost 
entirely for resale, whereas industrial, commercial and institutional 
customers "buy largely, though not entirely, for their own use. 

Although the great majority of wholesalers in each trade stock a wide 
variety of products, there is usually some similarity in merchandise. Since 
the range and types of goods carried necessarily reflect the needs of their 
customers, these trades usually Tray from many different industries; and only 
-in the case of such goods as automotive supplies, electrical home appliances 
and certain classes of industrial products do we find wholesalers carrying 
only the products of one, or at most a few, manufacturing industries. 

Since these instances of comparatively "pure" distribution channels 
are in the minority, regulatory measures, governmental or otherwise, which 
apply to all wholesale trades, must "be devised and applied independently of 
those pertaining to the regulation of producing industries. Otherwise such 
efforts could result only in each distributing trade and its individual units 
"being subject to a "bewildering maze of contradictor?/ rules and regulations, 
few of which could "be put -into actual effect. 

It is evident also that, even if regulatory measures were devised 
for the wholesale trades individually, the degree of success in their appli- 
cation would "be in direct proportion to their simplicity, and practicability 
from an administrative viewpoint. 

A ma j ority of the establishments in almost every wholesale trade 
are engaged in commerce across state lines. The establishments are general- 
ly located in the larger cities or "tra.ding centers." They employ salesmen 
to sell their wares to dealers and large consumers within what are known as 
"commonly accepted" trading areas surrounding the trading centers. There 
are, hov/ever, a few concerns in almost every trade which operate on a 
national or semi-national scale. 

With few exceptions the commonly accepted trading areas do not lie 
wholly within single states. I n the eastern part of the United States they 
usually include portions of two or three states; in the less populous 
southern and western portions they cover sections of four or five states* 
The areas overlap somewhat,- and there is considerable competition between 
wholesalers located in adjacent trading centers. 


. -194- 

By plotting the selling range of the salesmen of representative 
groups of establishments, and also by indicating the commonly accepted areas 
of many of these trades, as identified by trade associations and informed 
members, the interstate character of the "business can he shown in many causes. 
The method of establishing the propriety of federal regulation under the 
Commerce Clause of the Constitution, applicable to all others, is clearly 
laid out. 

Associations representing approximately 75 of these trades presented 
codes at Washington in the summer of 1933. It was found, however, that the 
trades competed with one another, overlapping in many directions. It was 
deemed unwise, therefore, to approve a separate code for each group, since 
"basic provisions might conflict and create competitive inequalities. 

Accordingly, it was planned to govern almost all wholesalers "by a 
general code, and to permit the adoption of separate supplementary provisions 
for individual trades, where such provisions would cause no competitive 

The General Wholesale Code stipulated that its provisions should govern 
all establishments engaged in wholesaling which, on the effective date, were 
subject to no other code or were not exempted by administrative order. 

This plan proved to be only partially successful. Of all the trades 
concerned nineteen subsequently insisted upon and were granted separate non- 
supplementary codes, unrelated to the G-eneral Wholesale Code. ITine others 
eventually withdrew, and became subject to provisions of manufacturing codes. 

Utlimately, only some 21,000 establishments, or less than one-third 

of the whole trade, remained under the provisions of the C-eneral Wholesale 

Code. Of these twenty-four trades obtained approval of supplementary codes, 
and the right to form separate code authorities. 

Of the trades having no supplementary codes but technically subject 
to the G-eneral Wholesale Code, three (the drug, the shoe and the florist 
wholesalers) denied the authority of the G-eneral Code and ignored its 
provisions throughout the effective period, although no administrative 
exemption was ever issued. 

During the depression years employment in the wholesale trades decreas- 
ed about 23 per cent, a reduction less than that which developed in manufac- 
turing industries. Regardless of changes in volume of business these 
merchants were faced with the need of minimum staffs in order to perform 
their essential services. Average weekly wages during the same years 
dropped approximately 43 per cent. These changes, of course, were by no 
means uniform throughout all the trades. Employment in a few actually 
increased, and the extent to which the wages were reduced varied considerably, 

In the summer of 1933 most of the establishments signed the President's 
Reemployment Agreement, though in nine trades substituted provisions per- 
mitting considerable flexibility in compliance. Generally speaking, the 
President's Reemployment Agreement was responsible for the only increases in 
employment that occurred in these trades under the ERA. The improvement was 
approximately eight per cent. 



T «Thile the General Wholesale Code itself was expected to produce an 
increase of from 10 to 15 per cent in employment, the provisions actually 
relaxed the requirements of the Presidents Reemployment Agreement "by 
eliminating the mandatory- spread "between work hours and store hours. The 
General "Wholesale Code was approved January 12, 1934, and there is no 
evidence of any general reemployment in the trades during the year that 

Wages in the wholesale trades, In general, averaged considerably 
higher than the Presidents Reemployment Agreement minima. Although the 
Agreement required adjustment • of wages above the minimum, the Code struck 
out this provision and permitted Jbh/e reduction of wages of workers whose 
hours had "been decreased more than 20 per cent. Consequently, the only 
changes in wage rates and- the only increase in wage earners 1 purchasing 
power which occurred during the effective period of the national Recovery 
Act affected errand "boys and perhaps a small proj^ortion of file clerks. 
Average weekly wages did not change perceptibly throughout the 22 months. 

Evidence of the effect of the Schechter decision on wage earners 
is not conclusive, cut indicates maintenance of wage rates and work— week 
maxima. Wholesale establishments were perhaps somewhat overstaffed for 
purposes of compliance with the codes. This is suggested "by the fact that, 
though job applications to the United States Employment Service "by persons 
whose common occupations were in these trades rose sharply in June and 
July, placements, for the first time in many months, fell off. 

Labor costs in the wholesale trades do not affect prices or competi- 
tive advantage as direct^ as does that part of expense in the case of 
manufacturing. Generally speaking the labor is easily replaceable, though . 
skill and specialization are required in the end of some of the 
trades. Wholesale wage earners^ unlike those in manufacturing, are not 
concentrates geographically or in individual establishments. Por example, 
while employees of manufacturing concerns in 1929 averaged 41.8 per estab- 
lishment, the average per wholesale establishment was only 9.5. Por the 
foregoing reasons =».nd because working conditions and compensation have 
been neither consp; cuoti<?ly ba.d nor good, labor in wholesale establishments, 
except in a few is:iated instances, has never "been unionized. Section 7(a) 
of the UationaJ. Industrial Recovery Act did not foster any perceptible 
increase in unionization. 

G-enerally speaking, wholesalers regarded the national Industrial 
Recovery Act as a means of checking the movement of distribution away from 
the channels in which they were major factors. The study of each of the 
trades has indicated a steady increase of direct selling to retailers and. 
large consumers by manufacturers, particularly since the turn of the 
century. Producers have usually not entirely ignored the wholesale merchant, 
but have engaged in what is known as "dual distribution", selling direct to 
chain stores, large city retailers and some large consumers and simultaneous- 
ly selling to wholesalers, without maintaining the price differentials 
formerly allowed the latter. Tflholesalers have regarded this as discrimina- 
tion, and obtained, the approval of a provision in the General V/holesale 
Code permitting, with the approval of the Administrator, the establishment 
of fixed, differentials. This they regarded as the most valuable provision 
in the Code. The HRA, however, was never willing to approve any specific 


differentials; and in consequence of this disappointment many trade 
merobfcrs "became apathetic toward the entire program. In at least one trade 
the Code Authority proceeded to make differential agreements with the 
manufacturers, and attempted to enforce them without administrative sanction. 

The 24 supplements to the General 'Wholesale Code contained 
approximately 200 trade practice provisions, dealing with destructive 
pricing practices, extension of credit and shipping terms, and in each 
instance the Class A. practices of the Federal Trade Commission. A few of 
these were designed to create unprecedented restrictions on trade; "but in 
general they represented practices that had "been commonly accepted among 
the merchants for many years. Usually the larger and more substantial 
members of the trades complied with these provisions; "but the "chiseling 
fringe 1 '-, which in each trade constituted about 10 per cent' of the members, 
soon came to ignore them. It vras felt that tangible evidence of violations 
was difficult to obtain, and that the compliance machinery was cumbersome. 
Particularly during the last six months of the HRA, therefore, there was 
little effort at enforcement by the Code Authorities. I]vidence concerning 
the states of competition in these trades since the Schechter decision has 
been found to be fragmentary and inconclusive. 



Table of Contents 

I. Historical Development of Industry 
II. Rapidity of Growth 
III. Large Number of Small Units 
IV. Substantial Concentration in New York City 
V. Limitation of Study to Outer Apparel in Needle Trades 

VI. Type of Establishment 

A. Inside Manufacturer 

B. Jobber with Contractor Relationship 

C. Sub-Manufacturer and Contractor 

VII. Capital Investment 
VIII. Importance of Credit 


I. Mortality 

Ac Average Business Life. 

B« tr Lure Dtatistics 

C. . ses of Failure and Withdrawals 

1. Man^g.^ent Inefficiency 

2. Unrelenting Conroetition 

3. High Cost of Designing and Labor 

4. Fluctuation in Piece Goods Prices 

5. Inadequate Capital 

II. Capital and r Jh mover 

A. Capital as a Foundation for Credit Expansion 
3. Ratios of Sales to Capital 

C. Price Range and Location Differentials 

D. Contractors Investment 

S. Manufacture r-Fnole sale r Operating Inside Shop 

F. Jobber Producing Through Contractor's Outside Shop 

C-. Cotton House or Wash Dress Manufacturers 

H. Infants' and Children's Wear Manufacturers 

I. Blouses and Skirt l.lanufacturers 

J. Coat and Suit manufacturers 

K. Dress Manufacturers 

III. Financing 

A. Individual Investment and Family Loans 
D. Sources of Credit 

1. Banks 

2. Piece Goods Suppliers 
C. Selling Policy of Mills 



D. Terms on Piece Goods purchased 

S, Selling Terms 

F. An. Appeal for Government Financing Aid in 1932 

IV. Profit and Loss 

A. Tide Fluctuations Within Industry Group 
3. Price 'Rpnge and Style Factors 

C. Fortunes of Industry Groups 

1. Cotton Wash or House Dress Manufacturers 

2 . Inf an t s l and Chi 1 dr en * s We ar Manuf ac ture r s 

3. Coat and Suit Manufacturers 

4. Dress Manufacturers 

D. Returned Goods and Markdowns 
3. Planning and Control 

V. Production Costs 

A. Materials 

B. Labor 
1 # Indirect Costs 

VI. Conclusions 




Part I. F inanc ial Problems of the Women 's Appar el Industry 

Preliminary Summary of Find ings 

More than $100,000,000 is invested as capital in the Women's 
Apparel Industry "by over 10,000 entrepreneurs , whose individual in- 
vestments vary from a few hundred dollars to $4,000,000. The impor- 
tance of capital in this Industry is essentially in its use as a 
foundation for establishing an enlarged credit structure. 

The Industry produced in 1929, according to the Census, a sales 
volume of $1,710,000,000, which thereafter dropped sharply until the 
1933 volume was only $846,000,000. The industry-wide ratio of annual 
sales to capital is normally 8 to 10 , with considerable variation 
among the subdivisions and the concerns in competitive groups. The 
depression reduced capital turnover averages about 50 per cent. The 
ratio of sales to capital generally diminishes as the size of the con- 
cern increases. Turnover also tends to decrease as the quality of the 
product increases. In certain manufacturing- wholesaling lines success 
may be achieved on a capital of $15,000, but the employment of $30,000 
to £50,000 appears a safer minimum. 

Types of Establishment 

Approximately 50 per cent of the establishments are those of small 
contractors or suhmanufacturers, with an average investment of around 
$2,500 - many with $1000 or less. The jobber producing through con- 
tractors 1 outside shops has a minimum of fixed investment and a higher 
capital turnover than the inside shop v/holesaler, who may have 30 per 
cent or more of his net worth invested in factory equipment. Invest- 
ment in fixed assets is higher outside of New York City, the garment 
center, wl 3re approximately 80 per cent of women's ready-to-wear cloth- 
ing is produced. The trend is away from inside shops and in favor of 
an extension of the con tractor- jobber relationship, with a tendency 
toward a reduction in capital investment and a higher turnover aided 
~by available credit facilities. 

The source of capital is the private funds of the entrepreneur, 
in some cases supplemented by loans from families and friends. The 
initial capital is augmented by the extension of liberal credits by 
banks and piece goods houses — the aggregate frequently running con- 
side r ably in excess of the not unusual ratio of two and one-half times 
net worth. 

The cutting-up trades are now the primary markets for woolen, silk 
and cotton piece goods. Textile mills which formerly produced for stock 
now tend to limit manufacturing operations to orders placed by the gar- 
ment manufacturer. The latter 1 s financial commitments are increased, 
and a sudden shift of fashions or a decline in commodity prices may re- 
sult in substantial losses. A tendency has been noted in the direction 
of speculative commitments against rising prices. 


-300- • 

Terms of purchase and sale remain substantially as under the 
The coat and suit manufacturers have attempted in vain to procure a 
restoration of pre-code discounts on woolens, and the cotton garment 
manufacturers would prefer the cotton mills' pre-code terns of four months 
to lighten financing costs. 


There is a deplorable lack of knowledge on the part of proprietors 
of juany concerns of. the fundamental principles necessary to successful 
"business administration, and an una&aptability to meet changing condi-' 
tions. Education in cost accounting principles and the application of 
uniform systems among the various groups of the Industry would he a step 
in the right direction, as would consideration of a wider and proper use 
of the trade acceptance in settling merchandise accounts. 

Since 1930 the apparel industries have suffered severely, from losses 
and drastic declines of capital. Some agile operators have made sub- 
stantial profits, hut at the expense of the majority, who losses 
or only a fractional percentage of profit. Vulnerability to rapid style 
changes in the short operating seasons propagates a high degree of 
speculation in a field of unrelenting competition. Industry disorganiz'a** 
tion militates against the acceptance of standards and the retailer is 
not averse to taking advantage of the situation, with a constant pressure 
on price and frequent returns of merchandise. 

Results Achieved Under the Code 

The codes brought a semblance of relief to the garment industries 
through establishing a forum for the discussion of problems and the 
arbitration of differences. In- spite of the higher labor costs es- 
tablished, a general feeling of advance toward stabilized conditions was 
manifest. Code standards have since been relaxed; but a dominant union 
control in the garment center of New York is fairly successful, in main- 
tainiri" direct labor costs at 100 per cent above those prevailing about 
four years ago, while from 10 to 20 per cent of the Industry in other 
localities not subject to union control is free to. pay labor on a lower 
basis, thus permitting ruinous conroetition. 

This condition, productive of -orofitless operation, has led to a 
tendency to migrate from New York, checked only by the necessity of main- 
taining headquarters in the established style center. In their dilemma 
many employers on the one hand and petty union officials on the other 
seek a solution through the circumvention of the established union rates 
of pay. This, and the unregulated jobber-contractor relationship, have 
produced insidious practices profitable only to the racketeer, and in the 
final analysis exoensive to the manufacturer, who must regard his ulti- 
mate outlay as an indirect labor cost of production. 

Manufacturers* organizations and ranking labor leaders alike are 
cognizant of the ills of the Industry, but through factional discord 
aupear powerless to unite upon a solvent. Absence of outstanding, fear- 
less leadership delays effective industry self-government. The urgent 
need is an authority to coordinate divergent interests, to conduct a 
campaign in management education and in cost accounting, and to exercise 


supervision over the machinery for the enforcement of lav- and order. 
Whether the law he of Industry 1 s making or Federal, its application, to 
he effective, should cover all organizations and elements within the 
Industry, including organizations of labor. Standards should he set up to 
provide fair wages for labor consistent with an equitable return on the 
employer 1 s efficiently administered capital. In support of such a pro- 
gram the Tfomen*s Apparel Industry would register an overwhelming vote. 




T able Of Content s 


I. The Jobber and the Contractor. Comparison of System with Other 
Industries. Operating Procedure. 

II. The Sub-Manufacturer. Comparison to Contractor. Original Purpose 
of Sub-Manufacturing. Valid Functions. Essentially same as Con- 
tractor. Various Relationships. 

III. The Corporation Shop 

IV. The Trading Relationship. The "Auction System. 11 Competitive Pres- 
sures and Excesses. 


I. Early Phases. Prior to 1869, Pirst Change from Inside Shop Method 

II. Expansion. 1880-1890, Immigration and [Easiness Expansion. Extent 
of System in Major Centers. 

III. The Sweat Shop. 

IV. Exploitation of Labor. 

V. Competition Between Inside and Outside Shops. 

VI. Pirst Attempts at Regulation, 1910-1912. Prohibition of giving 
Work to Out-of-Town Contractors; Registration of Contractors for 

VII. Development of Sub-Manufacturing. 

VIII. Pirst Proposals for Comprehensive Program of Regulation. 1913. 
Union platform and "Fifteen Points." 

IX. The War Period. 1914-1918. Rising prices, Hand-to-Mouth Buying. 
Increased Demand. G-rowth of Contract System 

X. The Post-War Doom. 

A. Continued Growth of Contract System. 

B. Coat and Suit Strike, 1919. 

C. Week-work Established. 

D. Pirst Agreement with Uewly Formed American Association, 
1. Provisions of Agreement. 

XI. Depression of 1921, 

A. Compliance Difficulties. 
3. Renewal of Agreements 1922. 



XII. Negotiations of 1923-1924. 

A. Threatened Stoppage by American Association. 

B. First Proposal for Limitation of Contract.ors. 

XIII. Appointment of Governor 5 s Advisory Commission. 1924. 

A. Stoppage Threatened,, 

B. Commission Appointed. 

XIV. Preliminary He commendation of Governor r s Advisory Commission* 

XV. The Bickinson-Kolchin Investigation* • 1925./ 

XVI. Pinal Recommendations. 1926. 
A. Endorsement of Limitation, 

XVII. The 1926-1929 Period. 

A. Continued Growth of Contract System.- 

B. Disorganization of the Union. 

C. Decline of Membership. 

D. Intense Competition. 

E. Mediation "by Gov. Roosevelt and Lieut. -Gov. Lehman. 
P. Pact-finding Commission and Pindings, 

Till. 1929 to the Code Period. ... 

A. Effects of General' Depression. 

B. Increase in Union strength. 

XIX. The Coat and Suit Code. . ' : . . ;; 

A. Approved Aug. 4/1933. .". 

B. Negotiations; 

C. Week— work abandoned. 

D. Piece— work Tre.ded for Limitation of Contractors. 

E. -Article VII as Adopted. 

1. Interpretation of Article VII re Limitation. ,, 
(a) Proposed Modifications. 

2. The Legal Status of Article VII re Limitation, 

3« Proposal o'f the Contractors to Abolish Limitation. 
4 . Ace oiap lis hue n t s . 

(a) Crystallization of Industry Objectives. 

(Id) Unity of Purpose. 

(c) Efficient Administration. 
5. Post-Code Developments. 

XX. The Dress Code. 

A. Pre-Negotiation Strike. 

B. negotiations 

C. Chief Bone of Contention Limitation of Contractors. 

D. Code Approved Oct. 31, 1933. 

E. Article -VH as Adopted. 

P. Comparison with Coat and Suit. 
G. Attitude of Industry. 

1. Stoppage of April, 1934. 

2. Appointment of Commission 

3. Gen. Johnson 1 s Assurance of Giving Effect to Commission* s 


4. Commission's Recommendations, 

5. Deadlock. 

.6. Contractors Submit Amendment, 

7. Hearing Fee. 1935. 

8. Assumption that NRA had Arbitration Power, 

9. Subsequent Conferences, 

10, Failure of Reaching Agreement, 
H, Summary of Dress Code Experience, 


I, Origin, 

A, The Immigrant Workers, 

1, Native Characteristics and Background. 

B, Expansion of Demand, 

C, Ease of Establishing Shops, 

II. Development and Growth, 

A, Technical and Business Conditions Favoring Contract Method, 

1. Style, 

2. Seasonality, 

3. Flexibility. 

3, Ease of Expansion via Contract System. 
C, Economic Waste. 

III. Growth of Style Factor in Recent Years, 

A, Styling and Selling Dominate the Market. 

B, Lack of Development in Production Technique. 

IV. Why Have Economic Forces Failed to Make Natural Adjustments? 

A, Ease of Going into Business and Small Penalty of Failure, 

B, The Competitive Advantage, 

0m, Normal Seasonal Unemployment. 

... * 

V. Union Responsibility. Compliance Difficulties. 

VI. Week-Work vs. Piece-Work, 



I . Fragmentary Nature of Data, 

II. Number of Shops, Number of Workers, Classified by Type of Estab- 
lishment, 1900-1931, All Women 1 s Clothing, 

III, Dress Industry, Number of Shops and Number of Workers, Classified 
by Type of Establishments, 1932 and 1935, 

IV. Coat and Suit Industry, Number of Shops Classified by Type of 
Establishment, 2/5/34 and 2/2/35 

V, Coat and Suit Industry.. 

A. Average and Maximum Number of Workers, 




B. r mber of Man-Hours, 

C. Fyroll Dollars, 

D. Production Units, Classified by Type of Establishment, 
2/5/34 and 2/2/35. 

VI. Size of Shops, Dress and T/aist Industry, 1925. 

VII. Comparisons, Average Ifamber of Workers, Inside and Outside Shops, 
Dress and Coat and Suit Industries. 

VIII. Classification of Shops According to Numbers of Workers, United 
States Market Area, Coat and Suit Industry, 1934 and 1935. 

IX. Seasonality in Somen's Apparel Industry Compared to Seasonality 
in Other Industries. 

'X, Seasonal Variations in Employment and Payrolls in New York State, 
Dress Industry, 1929-1932. 

XI. Seasonal Variations in Employment, Women's Apparel Industry, 
lieu York State, 1932. 

•XII. Seasonality in' Coat and Suit Industry. 

XIII. Comparisons of Wages between Inside and Outside Shops, Women's 
Apparel Industry, 1909 to 1931. 

XIV. Comparisons of Employment Between Inside and Outside Shops. 

XV. Comparison of Earnings and Employment in Contract and Inside Shops, 
Dress Industry, 1932, 

XVI. Comparisons between Inside and Outside Shops as to Payroll Dollars 
per Worker and Per Garment, Ilan— Hours per Garment, and Production 
Units per Worker, Coat and Suit Industry, 1934-1935. 

XVII. Mortality. 


I. Difficulties. 

A. The Defects of Collective Bargaining. 
3. Trading Atmosphere 

C. Experimental, Trial and Error Status of Regulation 

D. necessity for Effective Administration and Popular Acceptance 

E. No Magic Formula 

E, General Economic Influence. 

II. Broad Aspects of the Problem. 
A. Partly Lav. r , 
3. Partly Administration, 
C. Partly Evolution. 



III. The Immediate Problem. 
A. Law 
3, Administration 

IV, Regulation Directed at Basic Sources. 
A. Style, 
3. Seasonality. 

C. Control through Improving Technique of Production and Distribution^ 

V. The Program cf Regulation Directed at the Contract System Per Se. 
A. necessity for Comprehensive Program. 
3. Development of Program. 

C. Objectives. 

D. Major Proposals of the Program. 

VI. Comparison of Provisions adopted under Women's Apparel Codes. 

VII. Genera" 1 . Attitudes of Associations and Union. 
A. Union and Contractors Propose, 
3. Inside Manufacturers Support, 
C. Jobbers Orraose 

VIII. Limitation of Contractors. 

Significance of Commission's Recommendations, 
3. Objectives of Limitation. 

C. Basis of Commission's Recommendations* 

D. Position occupied by Commission and ^oy MA. 

IX. 3asis of Disagreement. 

A. The Jobber's Point of View. 

necessity for ZLexibility. 

Potential Abuses. 


Limitation Unnecessary. 
7. Large Contractors Suffer under Limitation. 
G-. Mortality cannot be 31amed on Auction System. 




X. The Viewpoint of the Proponents of Limitation. 

A. Stringent Control ITecessary* 

3. Loopholes ITullify Program. 

C. Allege Bad. Fait h on Jobber's Part. 

D. Looseness causes Wholesale Discharge of Contractors. 
2. Normal Relationship is Limited Anyway. 

P. Marginal Contractor should be Eliminated. 

C-. Pear Psychology. 

XI, Reversal of Position l^j the American Association. 

A. Proposal to Abolish Limitation. 

B. Obscure Purpose. 

C. Significance. 

XII, The Questions of Monopoly and Discrimination. 

XIII, Price Ploors. 

A. Ho Controversy. 



B. Difficulties of Administration 

XIV. The Unit System. 

A. Coat and Suit Experience. 

B. Impossible to Evaluate Possibilities' in Dress Industry until 
. .Tested., 

XV.. Settlement of Prices on Premises of Jobber. 

A. Purpose. 

B. Procedure. 

XVI. Confinement of Worlc to Union or Association Shops. 
... A, Hot in Codes. 

B. .Indus try.- Attitude. 

XVII. Equitable Distribution of work. , 

A. Principle ,lTot Subject to Controversy. 
3. Application Difficult.. 

C. Probable Future Development in Technique. 

D. Equitable Distribution to include Inside Shops Probabljr 
. Unattainable,, 


I. Nature of Conclusions. 

A. Ground Previously Covered. 

3. General Agreement on ITature of Problem. 

C. Regulation still' in Experimental .Stage., 

D. Her; Evidence Points to lieu Conclusions. 

E. General Principles, not specific recommendations. 

II. Significance of Developments Under .1TPA. 

A. First Comprehensive Programs Adopted under 1IRA. 
E. Collective Bargaining Had Failed, 

C. I7EA lleT? Element in regulation, Facilitated Croup Action. 

D. Did Hot Abolish Partnership. 

E. Cave Promise of Hew Era. 

P. Eesults. Varied under Different Codes. 
G. Conclusions, 

1. Collective Bargaining Inadequate, 

2. Central Agency .with Powers of Arbitration Desirable. 

III. Supplementary Functions of ET\A. 

A. Compliance. 

B. Scope. 

IV. necessity for Industry.. Organization and. Acceptance. 

V. Necessity for Comprehensive Program. 

VI. Specific Content of Program. 

VII, Future Possibilities. ... ... 




Prelimi nary Summary of Findi ngs 


The normal competitive pressures in the Women* s Apparel Industry, 
caused "by structural weaknesses and seasonal variations in demand for its 
products, are intensified by maladjustments in the mechanism of the con- 
tract system employed for a large part of its production. 

The functions of wholesale distribution are performed "by two princi- 
pal types of establishments - inside shops or manufacturers who perform 
all of the operations of production on their own premises, and jobbers 
who rely upon outside shops, contractors or submanufacturers for the 
greater part of their production. Inside shops often employ contractors 
for part of their production, and jobbers sometimes own or control one or 
more inside shops. 

The competition between outside shops is intense, particularly in 
slack seasons, and their powers of.' '-resistance are insufficient to with- 
stand the pressures brought to bear upon them. Competition between out- 
side shops spreads throughout the Industry, affecting the welfare of all 

Por many years prior to the. advent of NRA the problem of stabilizing 
and regulating the relationships, between jobbers and contractors was of 
paramount importance in the general program of industry stabilization. 
Various efforts at control were made from time to time, but it was not 
until the National Industrial Recovery Act introduced a new element into 
the methods and scope of. regulation that comprehensive programs were 

Results Achieved Under The Code 

Varying degrees of success were attained under different codes. The 
program adopted by the Coat and Suit Industry has as its basis the strict 
limitation of contractors employed, by an individual jobber to the desig- 
nated number necessary for his business needs. The evidence indicates 
that this program was successful; and upon the expiration of the code the 
system of regulating contractor- jobber relationships was continued in 
force under the National Coat and Suit Industry Recovery Board. 

Under the Dress Code strict limitation of contractors was neither 
specified nor implied. Prom the earliest negotiations to the end of the 
code period the question of limitation was the focal point of heated con- 

The success of the Coat and Suit Industry and the failure of the 
Dress Industry to effect a measurable degree of control over relation- 
ships in the contract system are probably explainable on the grounds of 
differences between the two in the intangible factors that determine their 
capacities for self-government - organization, leadership, psychological 

am An 



attitude, and status in the development of regulation. 

The adoption and effective administration of regulatory measures 
calculated to stabilize contractor-jobber relationships and diminish their 
ill effects are impeded by the partisan aspects of collective bargaining; 
by honest differences of opinion on proposed but untried remedies; by the 
status of organization; by the psychological attitude of particular 
branches of the Industry toward regulation, as indicated by the compari- 
son of the Dress and the Coat and Suit Code experiences; and by the opera- 
tion of general economic influences beyond the control of the Industry. 

Broadly speaking, there is comparatively little controversy on the 
various regulatory measures which have been proposed and adopted, vxith the 
exception of the limitation of contractors. The jobbers maintain that 
strict limitation impairs the necessary flexibility of their operations, 
and that its administration contains possibilities of abuse and discrimi- 
nation. The proponents of limitation state that stringent measures of 
control are necessary to prevent noncompliance through technical subter- 
fuge. It does not appear that limitation of itself necessarily promotes 
monopoly or discrimination; but there are potentialities for abuse if 
proper curbs are not placed upon powers delegated to administrative agen- 

The most significant fact is that after many years of failure to 
adopt more than limited half measures of control, under NRA comprehensive 
programs of regulation were adopted for the first time. NRA served as a 
new element in the mechanism of industrial self-government, a central 
agency and vehicle through which composite industry objectives could be 
given expression. In addition, NRA served to widen the scope of regula- 
tion beyond that covered by the established regulatory agencies of the 

The position occupied by the National Recovery Administration as a 
mediator in factional disputes, and the spirit of confidence inspired by 
the promise of a degree of stabilization previously unattainable, had the 
affect of overcoming certain deadlocks of long standing, and of facili- 
tating united action by the previously antagonistic elements of the In- 

It is possible that if the Act had been renewed, and if new codes 
had been presented in the summer of 1935, the influence of the national 
Recovery Administration would have assisted in the further development 
and refinement of regulatory measure s ? with the result that additional 
progress in stabilization might have been attained. 


■ • .. ■ ., 




.'••'. Table of Contents 


I. Classif i.cation of Garment Types, Women's Apparel Industry 
A* Major Groupings 
1, Dresses 

' : Ota ■' ^oats ... 

■ : ;• ■ 3 # Suits . 
• '" . - 4. Houses. 

■: f " ■..-•■ •• ' 5. Underwear 

. t ..J3. ■ Subdivisions of Major Groupings 
a • w. -\ ■••■-• :l.v Style 

■■•/ ' (;<Uv Price 

;£,. 'Material. 
•/'".■ .;- 4 ; ;r; Function 

5.-: Methods of Production 
6 Necessary Skill of Workers 
7. -Channels of Distribution 
. 3* Geographic Location of Shops 
..... '3* Organization under Unions and Trace Associations 

II.. ;Tlie- Dress. Code and the House Dress 'Division of. the Cotton Garment 

Code • . . • '' : 

.A. 'Sponsoring Associations, - General Purposes and 'Characteristics 

- 3. Code Provisions, - Discrepancy, in' Wage 'arid Hour.' Provisions 

C. The Overlapping Conflict, - Introductory 

' .... 

III. Purpose of Study 

A. To Recount the History of the Overlapping Problem of These Tito 
Codes " .. 

• - S. To Assemble the Evidence Available in NRA Records, on the Distino 
. tions between the Two "Industries" 
C. To Evaluate the Evidence and the Possible Means of Solution, to 
Provide Guidance for the Determination of Policy in any 3futur< 
Form of Industry Regulation under Federal Authority 


I. Formulation of Original Code Definitions of Industry 

II. Conflict on Original Definitions 

III. Appointment of Special Administrator . 

A* To Classify Manufacturers of House Dresses 

3. To report and recommend on remedial amendments of 

1. Definitions 

2o Wage Rates 

3, Hours 

n -." p 



IV. Recommendation of Special Administrator, $45 line of Demarcation, 
and Administrative Suggestions - 

V. Order 118-27 and 64-26 of September 27, 1934, Approving Amendment 
of Cotton Garment Code Establishing $22.50 Line of Demarcation, and 
Providing for Exemptions upon Showing of Special Hardship 

VI. Controversy Arising from September 27 Order 

VII. Order No. 118~273and 64-56, of February 19, 1935, Creating Im- 
partial Commission to He commend on Certain Applications for Ex- 
emption from Dress Code 

VIII. Order No. 64-63, of March 4, 1935, Granting Exemptions to 110 
shops, on Weighted Wage Scale Basis - 

IX. Order No. 64-67, of March 15, 1935, Extending Powers of Com- 
mission, to Study and Recommend Price Line of Demarcation 

X. Order No. 64-71, of March 29, 1935, Creating New Commission to 
Study problem, and Staying Order No. 64~63, Permitting Shops Ex- 
empted ^oy That Order to Operate on Scale Established "by Special 
Administrator Classification vop to $45, price line; also Provided 
for Applications for Exemption 

XI. Commission Appointed Pursuant to. Order of February 19, Terminated, 
and New Commission Appointed, to Act under Order No. 64-71 

XII. Board of Legal Appeals Heard Argument's re Legality of Order No. 
64-71, and Held It Illegal 

XIII. Order No. 64-84, of May 10, 1935, Rescinded Order No. 64-71 


I. Price 

A. General 

1. Regular Dresses High Price 

2. House Dresses Low Price 

B. Zone of overlapping ! ' . 

1. House Dresses $1.95 - $60 per doz. Wholesale 

2. "Regular" Dresses $3.00 per doz. - $1.50Each or Higher 

II. Materials Used 

A. General, - "Regular" Dresses mostly Silk, House Dre.sses mostly 
Cotton, Linen, and Cheaper Synthetic Fabrics 

B. Zone of Overlapping, - "Largely in Use of Cottons, Linens, and 
Synthetics in "Regular" Dress High Price, High Style Lines 

III. Methods of Production 

A. General, - "Regular" Dresses by Unit Production or .Dressmaker 

Method, (one operator doing all sewing). House Dress by Section 
Method, (separate parts of garment sewn by different operators), 
Normally Volume Production 



B. Zone of Overlapping, *.; "Regular" Dresses made in Large Part by 
Section Method. Statement that as High as 40$ of Dress Industry 
Uses Section Method in part 

IV. Degree of Skilled Labor Required 

A. General, - Highest Skill for Unit Method, Lowest for Section 

B. Zone of Overlapping, - Largely Determined "by T r "0 Methods of Pro- 
duction, "but Variations Occurred in Each Method, Claimed that 
Certain House Dresses Required High Skill, Some "Regular" Dresses 
relatively Low Skill 

V. Channels of Distribution 

A, General, - House Dresses to some extent sold to Special House 
Dress Departments of Stores, "Regular" Dresses to Dress Depart- 

B. Zone of Overlapping, - often No Distinction in Stores' Depart- 

VI. Style 

A. General, -, "Regular" #- Dresses, High Style Factor; House Dresses, 
Style Factor less Important 

B. Zone of Overlapping, - No Tangible Line of Demarcation 

VII. Geographic Location 

A. General, - "Regular" Dresses in Metropolitan Centers, particular- 
ly New York Metropolitan Area; House Dresses in Smaller Towns 

B. Zone of Overlapping, - Small Part of "Regular" Dresses Made in ' 
Small Towns. Very little Production of House Dresses in Metropo- 
litan Area of New York City 


VIII. Organization by Union and Trade Associations 

A, General, - "Regular" Dress Group Unionized, House Dress Group 
not Unionized. Trade Associations Representing the Two Groups 
largely on Union and Non-Union lines, "Regular" Dress Associa- 
tions' Primary Function that of Collective Bargaining, House 
Dress Association more the usual Type of Institutional Organiza- 

B. Zone of Overlapping, - some Union and Non-Union Concerns -in each 

IX. Wages and Employment 

A. General, - "Regular" presses, Higher Wages, somewhat shorter 
Period of Employment than House Dresses 

B. Inadequacy of data to show true picture 


I. The Theory of Establishing a Zone of Least Possible Conflict 

A. Failure to Establish such a Zone under the Codes 

B. Inconclusive Nature of Available Evidence 

C. Possibility that further Study might Indicate more Accurately 
the least Inequitable line of Demarcation 

D. Possibility that Special Administrative Treatment on Weighted 
Wage Scale or Otherwise might solve Problem 

1. Practical Difficulties of Administering such a Set-Up 


II. The Theory of Including "both "Industries" Under One Code, but Main- 
taining Wage Differentials on Price Lines 

A. Successful Application in Certain Codes 
1. Reasons for Success 

3. Evaluation of Possibilities as Applied- to Cotton Garment In- 
dustry, - Difficulty of Administering Conrolex Wage Scales in 
Other than Metropolitan Industry 

III. The Theory of Establishing Equal Hour and Wage Hates 
A* Necessity for Simplicity, - basic Minimum Wage 

B. Possibility of Objections of High Wage Croup being overcome by 
Desirability of Effecting some measure of Control, and of Check- 
ing the Flow of Business to the Lower Wage Croup 





Preliminary Summary of Findings 

The Women's Apparel Industry is divided into major functional group- 
ings by types of garment, such as dresses, coats, suits "blouses, under- 
wear, etc. There are subdivisions of the major groupings on lines of style/ 
price, material, function, methods of production, necessary skill of work- 
ers, channels of distribution, and geographic location of shops. The 
organization of the Industry under unions and trade associations has "been 
established largely along specific product lines, the organized and un«- 
organized groups being divided by the influence of one or more of the 
factors just mentioned. 

The production of dresses is separated roughly by tyoe of product 
into the "regular" dress group and the house dress group. The Dress 
Code presumably represented manufacturers of relatively higher triced, 

higher styled dresses, whereas the House Dress Division of the Cotton 
Garment Code presumably represented the lower priced garment made primar- 
ily of cotton, linen and inexpensive synthetic fabrics. The wage rates 
adopted under the two codes were substantially different, the Dress Code 
providing, for example an hourly minimum of 90 cents for operators in the 
New York Metropolitan Area, whereas the Cotton Garment Code provided a 
simple basic minimum of $13 per week in the North and $12 per week in the 

The Dress Industry is largely concentrated in the New York Metropo- 
litan Area, whereas the House Dress Industry is spread over the whole 
country, in the smaller cities and villages. Throughout the code period 
an intensely bitter controversy existed between these two "Industries" of the overlapping of the two codes and the resulting difficulties 
of individual manufacturers who happened to fall within the zone of con- 
flict. Various efforts were made by the National Recovery Administration 
to establish a line of demarcation, or an area of least conflict, be- 
tween the two "Industries, but no satisfactory solution of the problem had 
been reached at the time of the Schechter decision. 

The evidence contained in N.R.A. records is not conclusive as to the 
possibility of establishing a least inequitable line of demarcation. It 
is possible that further investigation might yield information upon which 
a zone of least possible conflict might be established. In such a zone, 
special administrative treatment on a weighted wag§ scale basis or other- 
wise might effect a satisfactory solution of the problem. There are 
practical difficulties, however, in administering such an arrangement. 

Solution to Problem 

It does not appear that the problem would be solved by merely in- 
cluding both industries under one code, establishing price line differen- 
tials. This principle has been applied with a fair degree of success in 
certain industries, but unless further investigation should reveal that 
there is a very small zone of actual conflict at some particular point, 
it would seem that the geographic distribution of the House Dress Industry 
would make the administration of a complex wage structure extremely difficult. 


The problem can 'be solved on the "basis of establishing equal wage 
and hour provisions for "both groups. As a practical matter this would 
require that the classified wages above the minimum provided in the Dress 
Code "be abandoned in favor of a more sinrole provision for a basic minimum 
wage applicable to both groups. Such a proposal would not have had the 
approval of the high wage group during the code period, but there have 
been evidences since the invalidation of the codes of a sentiment in in- 
fluential Quarters favoring a simple basim minimum, which would tent to 
eliminate "s'/eat shorj" competition ; even though it v/ould not equalize 
labor costs on specific price ranges and types of garments. 




Table of Contents 



I. Tyoe of Organization, - Union and Trade Associations 

II. Purposes, - Negotiation and Administration of Collective Agree- 

III. Collective Agreements 

A. Scope, - Labor, Trade Practice, Intra-Industry Relationships 
B« ITature , - Preferential and Exclusive, Interlocking 

IV. Organization for Enforcement and Adjustment 
A. The Impartial Chairmanship Machinery 
IU The Field Force 

1. Investigators, organizers, adjusters 

2. The Racketeers 

C. Penalties for Infractions 

V. Historic Attitude of United Front Against Outsiders 

VI. Coat and Suit Industry Illustrative of Full" Developed Form of 


I. Synchronization of Codes with Collective Agreements, Code Author- 
ity Organization with Industry Organization 

II. Supplementary Functions of Code Authority and Industry Organization, 
Avoidance of Duplication of Effort, Compliance Assistance. 
A. Codes Reached Unorganized Field 

D. Code Compliance Supported "by Activities of Established Agencies 

III. Complications of the Working Partnership 

A. Alleged Partial, Monopolistic, Discriminatory Attitude of Code 

33. The Question of True Representation 

C. Hie Question of Inequitable Restrictions on Membership 

D. The Question of Dual and Conflicting Responsibilities of Code 
Authority Officials when Occupying Positions in Industry Organi- 

E. Implied Responsibility of ilEA for Acts of Subordinate Industry 


. -217- 


I* Charges of Discrimination, Partiality, Oppression from Members of 

A* The Howard Report 

II . Questions Raised by NRA on True Representation, Inequitable Restric- 
tions on Membership , and Dual Responsibilities of Code Authority 

Am Attitude of the Legal Division 
B* Attitude of the Deputy 1 s Office 


It Objectives, ERA and Agencies, Essentially Similar, but Approach 

II. Legalistic vs. Practical Attitudes on Alleged Monopoly and Discrim- 

III. The Charges Were Not Substantiated, nor was the 'Atmosphere Entirely 

IV. Possibilities of Abuse, and Dif ficulties of Supervision, raise 

questions of Sroad Principle and Practical Policy on the Delegation 

of power to Quasi-Governmental Agencies 

Am The question of Impartiality in the Exercise of the Judicial 

and Police Functions by Industry 
3« The question of Saf e guards , and Degree of Government Control 
C. The question of Applying a Broad Principle of Industrial Self- 
Government in Specific Instances 


-218- §- 



Prel imina ry Sum mary of_ Findi ngs 

Establ ishe d Agencies of Sel f-G-over nm ent in the Industry 

In certain branches of the Women's Aoparel Industry a highly 
developed form of self-government had "been- in existence for many years 
prior to the advent of the national Recovery Administration, Collec- 
tive agreements between organized elements had been. administered 'by an 
elaborate mechanism, including impartial machinery for the adjustment 
of intra— industry differences, and a field force of investigators, or- 
ganizers | and adjusters, who performed the function of enforcing com- • 
pliance with the provisions of the agreements. In addition to the 
direct action of strikes end lock-outs, penalties for infractions were 
provided in the by-laws of the union and the trade associations, in 
the shape of fines, dismissals, or suspensions. The collective agree- 
ments were often interlocking arrangements for preferential and exclu- 
sive dealing with signatory members of the different groups. Certain 
branches of the Industry were highly centralized in metropolitan areas, 
particularly the area in and surrounding New York City, Under these 
circumstance s a more or less united front was presented against out- • 

NRA and the Esta blished Agencies 

It was logical that under NRA the established agencies of the 
Industry should be combined with and adjusted to the code authority 
mechanism, to avoid duplication of effort and to enable the activities 
of each type of organization to supplement the work of the other. In 
certain instances the provisions of codes and collective agreements 
were synchroni zed. The impartial judicial machinery of industry was 
merged with the adjustment agencies of the code authorities, and the 
responsible officials of the trade associations and the union were 
elected to represent their respective groups on the code authorities. 
The Codes covered territory outside of the organized field and code 
compliance was strongly supported by the cooperative and supplementary 
efforts of the established agencies. It was a working partnership 
that proved effective, but it had complications* 

C harge s Against the Code Authority 

The Coat and Suit Industry provides an example of a fully develop- 
ed form of industry organization, which was coordinated with the Code 
Authority in the manner outlined above. The difficulties which arose 
"between the Coat and Suit Industry .and the National Recovery Adminis- 
tration were partly questions introduced by NRA as to the truly repre- 
sentative character of the Code Authority, the restrictions placed up- 
on membership in the sponsoring trade associations, and the alleged 
dual and conflicting responsibilities of Code Authority officials who 
occupied positions in the established agencies of the Industry; and 
partly allegations of monopoly, discrimination, and oppression, rais- 
ed by industry members who were outside of the interlocking association 

-PI c - 

and "union control, or who had come into conflict with the interests of 
the New York group, 

[These charges ranged all the way from alleged partiality in the 

exercise of the judicial function by the Code Authority, to the alleged 
use of racketeers and strong-arm methods in the enforcement of the 
provisions of the Code and of collective agreements. "Thile the charges 
were not definitely substantiated, neither was the o/tmo sphere entire^ 
cleaned* It is probable that the questions raised by NBA on true repre- 
sentation, inequitable restrictions on membership, and dual responsi- 
bilities of code authority officials, would have 'been satisfactorily 
resolved had the National Industrial Recovery Act been renewed. 

On the other charges, even though in many instances they may have 
been merely a form of defense presented l)j recalcitrant members of the 
Industry, there were sufficient possibilities of abuse to raise questions 
of broad principle and practical nolicy on the delegation of power, 
which must be considered in connection with any future form of federal 
control of industry. 

It is impossible to conclude from the Coat and Suit experience that 
general oolicies may be established which would apply to all industries 
alike, but this experience suggests that certain changes from ITBA., 
policy might well be made. It appears that there is justifiable doubt 
of the advisability of permitting industry in certain instances to 
exercise delegated judicial and police -cowers, in view of the naturally 
and historically partial attitude of the organized elements charged 
with their administration. 


'CtCt J 



Table Of Content s 


I. Outline of Objectives 
II# Sources of Information- 
Ill. Significance of Results • 


I. Quantity and Value of Total World Trade 

II. Total Foreign Trade of the United States 

III. Comparison of the United States' Share of Total World Exports and 
Imports in the Period 1927-29 with 1934 

IV. Decline in the Price Level of Internationally Traded Commodities 
from the Average 1927-29 to 1934 

V. Relation of United States "terms of trade 1 ' to Loss of Export Mar- 


I. Importance of Trade Between the United States, United Kingdom, 
Japan, France, Italy and Germany 

II. Trade Balances 
III* Fluctuating Exchange Values of Currencies 

IV* Changes in the position of the United States as supplier in prin- 
cipal foreign markets 


I. Progress toward industrial recovery in the principal trading 

A. Wholesale Prices 
3. Industrial Production 
C. Employment 

II. The Relation of Declining Foreign Trade to the Problem of Indus- 
trial Recovery in the United States 

A. Relation of Exports and Imports to the Total Net Value of Domes- 
tic Production of Manufactures 

B. Imports and Exports Compared with principal Manufacturing Groups 

C. Loss of Employment Involved in the Decline of Export Trade 

D. Relation of Import Competition to the Program of Recovery 




Prelimi nary Summar y of Findi ngs 


In general an effort has been made in this study to survey the 
National Industrial Recovery Act experience with foreign trade problems, 
including a review of the nature and effects of the various types of 
foreign trade regulation attempted, to formulate the issues involved, 
and to present a summary of the available information from which con- 
clusions may be drawn, 

Hie principal subordiante objectives may "be specifically stated as 
follows: (a) To indicate the relative importance of foreign trade, both 
imports and exports, in the industrial economy of the United States, 
the. extent to which it has declined, and the effect of that decline on 
the problem of recovery to which the National Industrial Recovery Act 
was addressed; (b) to explore the legal implications of those provisions 
of the Act relating to foreign trade in the light of existing law f , and 
the legal -problems incident to the administration of those provisions, 
and to evaluate them as legal measures for achieving the desired regula- 
tion or control; (c) to provide an adequate review of the administration 
of Section 3 (e) the (tariff section) of the Act and to evaluate that 
section as' a method of dealing with the problem of import competition 
in connection with the program of industrial recovery, ( d) to survey 1IBA 
experience in the regulation of import trade "ay means of codes, including 
problems incident to the administration of such codes and their ef- 
fectivness as a- method of dealing with, inpoyt trade problems; and (e) 
to indicate the extent to which the commerce of particular industries is 
international in character, and the importance of import and export 
trade in particular commodity or code groups, and to survey the problems 
of industrial regulations to which foreign trade gives rise* 

In connection with this -.stud?" an effort was made to assemble all 
available materials having, a/'beariwg uoon the various aspects of the 
problem, from both government and private industry sources. The bulk 
of the materials examined was drawn from the files of the ERA and the 
United States Tariff Commission* The IJIiA materials included principal- 
ly the records of the Imports Division, relating to the admini strati on 
of Section 3 (e) of the Act, Legal Division memoranda relating to foreign 
trade- problems, and materials from the industry divisions relating to 
those which -specifically '-covered imports or importing, and others 
which involved important import and export trade problems • 


UiJITED STATES FROi.i 1927-1929 TO 1934 

Tforld trade in 1934 with a value of 11.7 billion dollars (gold) 
had declined 55 per cent from the 1927-29 average^ but the index of 
quantity fell only 20 per cent during this period. In every important 
country . the decline in the physical volume of foreign trade has ^oeon 
much less during the depression than in the total value. In fact, Japan 
increased the quantity of both exports and imports. 

Since 1929, "the foreign trade of the United States, in quantity/ 
and gold value, has fallen nore abruptly than world trade and to a 
greater extent than has the foreign trade of any other principal trading 

During the base period 1927-29 the United States supplied 15.5 per 
cent of total world exports and received 12.1 per cent of total world 
imports. By 1934- these shares were 11.0 and 8.1 per cent, respectively* 

The price level of internationally traded commodities in 1954 was 
43 per cent of the 1927-29 average. The level of United States export 
prices has been higher than the world average, although lower than the 
general level of internal prices. 

The index for the quantity of United States imports during the 
depression remained much higher than the index of their value, and, 
also, higher than the quantity and value Indexes of United States ex- 
ports. This would seem to indicate that the United States has been 
buying its imports (largely raw materials) more cheaply than it is 
willing to sell its exports (more than half manufactured goods). This 
is probably an important factor in the loss of United States export 


The principal trading countries of the world are the United States, 
the United Kingdom, Germany, Prance, Canada, Japan, and Italy. To- 
gether they account for practically half of the world 1 s imports and ex- 
ports. The United States sends approximately 56 per cent of its exports 
to these si:: countries and receives about 40 per cent of its imports 
from then* The United Kingdom, Prance, Oernaayj and Italy, each tr\:e 
from 10 to 15 per cent of their total imports from the United States* 
Japan takes about one-third and Canada more than one-half of its imports 
from the United States. Canada and Japan ship from 30 to 45 per cent 
of their exports to the United States. Italy sends about 10 per cent 
of its total exports to this country, and the other three countries 
about 5 per cent each. 

The largest favorable trade balances of the United States in 1934 

were with the United Kingdom, Canada, and Japan. The net balance with 

the United Kingdom, the largest with any country, was only 50 per cent 

of the 1927-29 average. In 1934, the? favorable balance with Canada 

fell to 25 per cent of the 1927-29 average. During 1927-29 the net 

balance with Japan was unfavorable by $102 million, but in 1934 it was 

favorable to the extent of $110 million (page 49) With Prance,, 

and Germany, the United States consistently has substanial favorable 

trade balances. In 1934 these were $84 million with France, $46 million 

with Italy, and ,$77 million with Germany. 

As contrasted with the maintenance of the gold standard by Prance, 
and the at least nominal adherence to it of Germany and Italy, the 
exchange va.lue of the pound sterling declined sharply after 1931 and 
averaged 68 per cent of par in 1933, 62 per cent in 1934. The Japanese 
yen declined steadily during the depression and in 1934 stood at 35 

— OO'Z — 

per cent of its gold value. ..The tread of the exchange value -of the 
Canadian dollar has paralleled that of the United States dollar, and 
In 1934 they were each at practically 60 per cent of gold value in 1927- 
29. • 

The relative position of the United States as a supplier of imports 
into all of these countries, except Japan, has declined steadily since 
the "base period of 1927-29. In 1934,' Japan took 34 per cent of its 
total imports from the United States, compared with an average of 30 
per cent for 1927-29. Hie United Kingdom received only 11 per cent of 
its total inports from the United States in 1934, whereas the ratio had 
been 16 ;Der cent in 1927-29. Canada took 58 per cent of its imports from 
the. United States in 1934, the average for 1927-29 having "been 67 per- 
cent. France took 12 per cent of her total imports from the United ' 
States in 1927-29, and 10 per cent in 1934. Italy took 18 per cent of 
her imports from the United States in 1927-29, and 13 per cent in 1934. 
Germany 1 s imports from the United States were 14 per cent of her total 
imports in 1927-29, and 8 per cent in 1934. 


Based upon 1927-29 relationships and corrected to the gold equiva- 
lent, the index of the general level of wholesale price in the United 
States in 1934 was 46. This was decidedly lower than those for G-ernany 
(71) , Italy (55), and France (5l) , but was higher than for Canada (45), 
the United Kingdom (42), and Japan (30). On the same basis, in 1934 the 
index of industrial production for the United States (7l) was at the foot 
of the listf with Japan (146) at the top, and the other countries higher 
that the United States hy large margins. Based on .1927-29, the indexes 
for industrial employment in these countries in 1934 were not so widely 
spread. The United States index (78) was higher than that for France 
(77), and Italy (72), but lower than for the other countries. Germany* s 
index had reached 83, and the indexes for the United Kingdom (100) and 
Japan (99), were practically at the 1927-29 levels. The foregoing com- 
parisons indicate that these six countries in 1934 had more nearly restor- 
ed their - internal economy to normal than had the United States. 

The total value of United States exports in 1934 was $2,100 million, 
a decline of 69 per cent from $5,100 million, the average value of ex- 
ports for 1927-29. Imports into the United States in 1934, valued at 
$1,600 million, were 61 per cent below the 1927-29 average of $4,200 
million. A rough estimate indicates that in 1934 the total exports of 
United States merchandise amounted to 7.5 per cent of the value of the 
domestic production (including transportation costs) while total imports 
were about 5 per cent of the value of production (excluding transports/? 
tion costs) • 

Should exportation and importation be considered as industries and 
be ranked with the sixteen industry groups of the Census of Manufactures, 
they would have been, respectively, sixth and seventh in importance in 
1929 and tenth and eleventh, In 1933. 

Exports of manuf a.c ture d go ds , in 1927-29 had an average value of 
$3,500 million which declined to $1,400 million in 1934. These exports 
represented 8 per cent of the net value of the domestic production of 


manufactures for 1927-29, and abQut 5 per cent in 1933» The difference 
between the value of these exports was $2,100 million, or the equiva- 
lent of 4«9 per cent of the average value of domestic products (gross f ) 
reported by the Census of Manufactures for 1927 and 1929* Applying 
this percentage to the average nunber of total wage earners in manu- 
facturing in those years , the decline in export trade represented a loss 
of employment for 300,000 to 400,000 persons* The Census of Manufac- 
tures shows only seven industry groans having more than 400,000 employ 
ees in 1929, and only five in 1933# 

Ihe average value of imports of manufact ure d ^oods was $2,150 mil- 
lion in 1927-29, declining to $930 million in 1934. The ratio of these 
imports to the net value of domestic production of manufactures declined 
from about 3 oer cent in 1927-29 to 3.8 per cent in 1933. Despite the 
decrease in value, it will be observed that the impact of imports upon 
declining domestic production had not greatly lessened. 


■ Table of Contends 


I* In Relation to Domestic Production 

II. In Relation to Domestic Wholesale Trade 

III. As a Source of Raw Materials and Consumer Goods 

IV, As a Source of Revenue 


I. Imports "by Commodity Groups -. 

II • Principal Import Commodities 

III. Foreign Control of Imports 


I. Definitions of Imports, Importing and Importer 

II. Throes of Importers, Processes Involved in Importation, and 
Functional Specialization 

III. Commodity Specialization 

IV. The Shifting Character of Import Operations 

V. Size of Import Eirms 


VI. Labor Aspects of the Importing Trades 

VII. Organization of Importers in Trade Associations 


I. Under Code Provisions for the Control of Imports 
km The Lumber Code 
B. The Copper Code 

II. In Connection with Exemptions from Code Provisions to Meet Import 

A. Price Provisions 

B. Trade Practice Provisions 

III. In Conaection with Code Provisions for Eiling Complaints 
under Section 3 (e) 



A* Hypes of Control sought by Industries 
1* Volume Restriction 

2. Regulation of Prices and Other "terms and conditions" 
of importing 

3. Design Piracy 
4 # G-eneral Code Compliance 

B. Control effected under Section 3 (e) 
1. Of Price Competition ~ fees Imposed on Imports 

of Cotton Rugs 
2o Quantitative Limitations 

(a) Cotton Rugs 

(b) Wood-cased Lead Pencils I: 

(c) Red Cedar Shingles 

IV« Control of Imports in Connection with hut not under NRA Codes 
A. The New sprint Agreement 
B» The Northwest Logging Agreement 
C» Voluntary Action by Importers 

L Woodpulp 

2* Pottery .' "•' • ■■■'• - ; - ' 

3. Cotton Textile 


I© Inclusion of Imports in "Domestic" Industry Codes 

A«» Codes in which Importers were Specifically included 

B« Codes in which Importers might be Included by Implication 

C. Codes in which "Sales" were not limited to Sales by Manufacturers 
D« Codes in which definitions involved "The Original Sale" of the 

Industry Products 
E» Distribution Codes which did not Exclude Importers by Definition 
F. Results of Varied Code Coverage of Importers 

II • Codes for Importing Trades 

A. "G-eneral" Importing Trade Code 

1. Early activities Regarding an Importing Trade Code 

2. Formulation of the Code 

(a) Sponsors 

(b) Attitude of Various Groups 

(c) Jurisdiction of the Code 

3. Administration of the. Code 

(a) The Code Authority 

(b) Efforts of the Code Authority to safeguard its 

(c) Trade Practices 

B. The Code Supplement for the Linen Importing Trade 

C. The Code Supplement for the Oriental Rug Importing Trade 
I). The Code for the Assembled Watch Industry 

'E. The Code for the Imported G-reen Olive Trade 

F. The Code for the Imported Date Packing Industry 


. . -.227- 

Preliminary Summary .of. Findings 


The ratio of the total value of imports, to the total net value of 
domestic production, not including transportation costs, amounted to 9.1 
per cent in 1929 and 4.8 per cent in 1933. The ratio of imports of 
manufactured goods to the total net value of domestic manufactured goods 
was roughly 4.8 per cent in 1929 and 3.8 per cent in 1933. 

Based on the Census of American Business the aggregate sales of 
importers and import agents in 1933 were approximately 2-1 1 2 per cent 
of the total sales of all types of domestic wholesale trade, 

• "Based on an average of 1929, 1931, and 1933, approximately one- 
fifth of ail raw materials going into domestic production is imported; 
these raw materials account for roughly 45 per cent of total imports. 
The "balance, 'products of foreign manufacture, amount to about one- 
thirtieth of the aggregate value of the domestic output of manufactured 

Customs receipts from. imports amounted to over 600 million dollars 
in 1929 and 250 million "dollars in 1933, or 15 per cent and 11 per cent, 
respectively, of the total federal revenue in those years. 


Imports in 1934 were distributed as follows "by economic classes: 
crude materials, 28 per cent; crude foodstuffs, 15 per cent; manufactured 
foodstuffs, 17 per cent; semi-manufactures, 19 per cent; and finished 
manufactures, 21 per cent. 

The principal inroort .commodities in 1934 were, in order of importance 
"by value: coffee 8 per cent, raw sugar 7 per cent, crude rubber 6 per 
cent, newsprint^ 4.7 per cent, and raw silk 4.4 per cent. These accounted 
for over '30 per cent of the total in that year. Other important items 
amounting to one per cent : or more of the total were: tin, woodpulp, 
furs, distilled liquors, hides and skins, "copper, "burlaps, vegetable 
oils and fats, crude petroleum, unmanufactured tobacco, bananas, fish 
and fish products, cotton cloth, wearing apparel, and lace. The 18 
items enumerated accounted. for approximately 55 per cent of the total 
imports in 1934. 

A number of import commodities, such as sisal, tin, quebracho 
extract, quinine, crude rubber, potash, and green coffee, all essential 
to domestic industries, are subject to some degree of control by foreign 
producers, or by the governments of the countries of origin, through 
taxation or other measures directed toward the manipulation of market, 
supplies and prices. 



On account of the varying character of import transactions, which 
depend upon the manner of handling imports and upon the types of com- 
modities and circumstances involved, there is considerable difference 
of opinion among authorities as to the area covered by the terms used 
to describe the persons and -processes involved in importation; and there 
is unusual looseness in the -use of such terms in the trade. 

Importing organizations may "be "broadly classified, according to the 
major functional aspects of. their operations, as follows: (a) import 
dealers, who engage in the wholesaling. of .merchandise purchased abroad; 
(b) local selling branches of foreign producers and merchants, which 
perform the. functions of local warehousing and distribution for their 
principals abroad; (c) import commission houses, which sell foreign mer- 
chandise on contractual arrangement with foreign principals, sometimes 
involving consignment; (d) imoort brokers and purchasing agents, who 
acquire foreign merchandise for their domestic .principals, and (e) special 
departments maintained by industrial consumers and by department stores 
for the acquisition of foreign materials or merchandise. 

Generally speaking, importers who handle the more important import 
commodities, such as coffee, sugar, rubber, etc., confine their operations 
to one commodity. However, in the case of semi-manufactured and finished 
products most importers handle related lines, and. the larger importing 
organizations often handle numerous unrelated lines. 

Numerous import firms handle several commodities' and several foreign 
accounts, each on a different basis. They are solicited constantly by 
foreign merchants, and contractual arrangements for financing and mer- 
chandising are arrived at by bargaining. .The import firm may be dis- 
posed to act as dealer in one line, while, circumstances may cause it to 
contract to handle 'another foreign line .only, on a brokerage or commission 
agency basis. 

The size of import firms varies widely, depending upon the complexity 
of functions performed, the number, of outlets solicited, the frequency of 
solicitation, .and the character of. the commodity handled. Among the 
largest organizations . are Amt org and . Mi t sui , domestic branch sales offices 
of foreign organizations, and employing a- personnel of 150 or more in 
their import operations. There are several, general import dealers who 
give employment. to. 50 or more, but the average number. of employees of 
import dealers, does not exceed seven* Although there is a large number 
of individual establishments * the . typical .import brokerage firm in many 
commodity lines would employ only one or two salaried persons. 

The labor aspects of importing trades cannot be analyzed effectively 
at this time owing to the. paucity of. available information. According 
to the Uhol.esale Census of i,929 and 1933, . employment in the importing 
trades dropped from 23,000 to ..19,000. Large import firms employ com- 
modity buying .and. selling specialists, as well as clerical staff com ris- 
ing accountants and stenographers. Commission agencies and import broker- 
age firms employ in many cases just one accountant and one secretary^ 
stenographer. No wage or hour data, are submitted by sponsors for the 


importing trade code. Census data would indicate that the average wage 
levels were higher than that for all wholesale firms, 

The three associations of national scope which have a considerable 
folio v/ing among importers comprise the National Council of American Im- 
porters and Traders, The American Exporters and Importers Association, 
and the National Foreign Trade Council, There are also a number of asso- 
ciations grouping specific commodities, such as the Shellac Importers 
Association, the Gum Importers Association, the Kemp Brokers Association, 
etc. The three general associations make a careful study of government 
measures affecting importation and they present their views on pending 
legislation. The commodity associations make a usual practice of facili- 
tating adjustments and standardizing import contracts. 


A number .of NRA codes contain provisions designed to control imports. 
In connection with its production control the Lumber Code specified that 
in the case of divisions utilizing foreign raw materials, the quotas and 
allotments in terms of imports. The administrative agency for 
the Philippine Mahogany Subdivision controlled imports by allotment, and 
the NRA Litigation Division pressed court action against several import- 
ers who exceeded their import quotas. The Copper Code contained a pro- 
vision fixing sales quotas and specifying that only copper within these 
quotas allotted by the Administrative" Agency could be labeled "blue eagle 
copper"; also that only blue eagle copper could be used in the manufac- 
ture of articles for sale to the United States Government, 

A number of NRA codes set up a regular procedure for the granting of 
exemptions from code provisions in the event of import competition. Au- 
thority was granted to sell below cost to meet import competition in a 
number of codes including mica, clay machinery, cutlery, snap fasteners, 
file manufacture, and fabricated metal products. In certain other codes, 
import competition was declared to be a just cause for granting exemption 
from various specified trade practice provisions. 

In connection with the filing of complaints under Section 3 (e) pe- 
titioners proposed various types of control of imports. In numerous 
cases they suggested the restricting of imports to a quota, representing 
either an absolute figure or a given percentage relationship to the vol- 
ume of domestic production. The jeweled watch manufacturers requested 
that imports be limited to a volume corresponding to domestic production. 
Other petitioners suggested terms and conditions to apply to imports, such 
as that importers be enjoined from selling below a specified price level. 
For instance, the Tanning Extract Industry suggested that importers of 
quebracho should be licensed, and that licensees should agree to sell at 
a specified price. The Pottery and the Toy and Playthings Industries in- 
corporated in their 3 (e) complaints the suggestion that importers be 
controlled in a manner to prevent design piracy, Several petitioners 
asked that importers be required to comply with all provisions of the 
codes for those industries. 

In connection with Executive action arising out of 3 (e) complaints, 
a fee was super- imposed on the duty rate levied on imports of cotton rugs. 
Quantitative limitations were imposed on cotton rugs (other than Oriental), 



wood-cased lead pencils, and red cedar shingles; The quotas on rugs and 
pencils were fixed "by informal agreements with representatives of the 
Japanese Government, which undertook to regulate shipments to this mar- 
ket. In connection with shingles, Canadian manufacturers agreed to limit 
their exports to this market to 25 per cent of domestic consumption, as 
estimated for stated intervals* Japanese shippers of "bleached cotton 
cloth voluntarily formed an association to control shipments to this mar- 
ket, in anticipation of Executive action pursuant to the 3 (e) complaint 
filed "by the Cotton Textile Institute, 

Imports of a number of commodities were controlled in connection 
with NRA codes "by voluntary agreements entered into "between the coded 
industries and agencies engaged in importation outside the jurisdiction 
of the code, Canadian producers of newsprint entered into a voluntary 
agreement with the domestic producers to fix prices, "but it was short 
lived* The Canadian producers later signified willingness to enter into 
another agreement with the coded domestic industry under NRA sanction, 
but efforts to set up a satisfactory control "board were unsuccessful, 
owing to the opposition of newspaper publishers. British Columbia ex- 
porters of timber set up a special sales agency in Seattle, and this 
agency agreed to limit imports to a quota assigned by the Pacific North- 
west Loggers Association. 

Scandinavian shippers of woodpulp operated under an understanding 
with domestic producers as to price for a number of months of the code 
period; but this broke down as a result of underselling by certain im- 
porters, Japanese shippers of pottery voluntarily regulated prices of- 
fered to this market. A Japanese association was formed to control ex- 
ports of cotton textiles. 


Before consideration was given to establishing a policy as to their 
proper place in the code framework, importers had been included within 
the jurisdiction of 25 industry codes by specific mention in the defini- 
tion, notably in the codes for lumber, coffee, mica, bleached shellac, 
packaging machinery, printing equipment, athletic goods, surgical goods, 
and jewelry manufactures. In 36 other industry codes the definition was 
worded in such a manner that importers might be included by implication. 
Careful examination of all available evidence covering the formulation of 
these codes raises doubt as to proper representation of importers. The 
definitions of 59 other coded ies included the manufacture and 
sale of the industry products, but did not limit such sales to sales by 
the domestic manufacturers. In the absence of such limitation,, the juris- 
diction of a number of these codes. was interpreted in a manner to include 
importers , 

Considering all imports during the period of code operation, it is 
estimated that roughly 35 per cent was handled by firms within the pre- 
scribed field of the Importing Trade Code, about one-half of which was 
imported by these firms on a merchant basis, and about one-half as com- 
mission agent or broker; another 35 per cent was handled by import firms 
functioning under other codes; and the balance of 30 per cent was imported 
by special departments or branch offices of manufacturers and retailers.-' 



When the National Recovery Administration undertook to codify certain 
domestic trades, numerous import groups joined in a move to propose a 
separate code to cover importers. While the sponsors of this code would 
have preferred to cover the whole importing field, they were faced with 
a de jure situation in which important segments of the general importing 
business were already covered "by special commodity import codes or "by re- 
lated industry codes. The Importing Trade Code definition consequently 
limited the code field to firms principally engaged in importing merchan- 
dise or principally engaged in the selling of imported merchandise to 
manufacturers, wholesalers, and retailers, with specific exemption of im- 
porters of merchandise for their own consumption. 

The Code Authority for the general Importing Trade operated effi- 
ciently within its prescribed field. Its principal problem was the iron- 
ing out of conflicts with other cod.e authorities over matters of juris- 
diction. It negotiated a number of agreements with other code authori- 
ties designed to harmonize trade practices. 

In the form of supplements to the General Importing Trade Code, sep- 
arate divisional codes were approved for linen importers and for oriental 
rug importers. Dissensions within the ranks of these divisional groups, 
and the late date of entry into operation, greatly restricted the achieve- 
ments of these supplementary codes. 

Other codes were approved for the following special importing groups: 
Imported Green Olives, Imported Date Packing, and Assembled Watches * 



■ ■ ' » 

Table of Contents 



I, United' States Share of World Forest Resources ' 

II. Location of Principal Porest Stands and Manufacturing Areas 

III. Consuming Industries 

IV,. .., Foreign Trade Centers 

V. Relative Importance of Foreign Commerce to the Industries In the 
: United States • • 



I. Importance of Total Imports and Exports 

II. The Trade 'by Principal Species 
A; Softwoods 

1. Importance of Exports and Imports 

2. Principal Markets and Sources 
3, hardwoods 

1. Importance of Exports and Imports 

2. Principal Markets and Sources 

III. Methods of Exporting and Importing 


I. Exports 

A. Douglas Fir Plywoods and doors 

B. Box Shooks and Cooperage 

C. Railroad. Cross Ties 

II. Imports 

A.. Red Cedar Shingles 

B. Hi seel lane ous Manufactures 


I. Code Provisions Affecting Imoorts 

A. History and Text of Provisions 

B. Administration 



II. Code Provisions Affecting Exports 
A, History and Text of Provisions 
,'iw/^'j. Admin-rs'tration-- ••' '•'- •-•-•••■-■ - • *•■■■ -*~« — -.-•,..- ,-.— 


I. Changes in World Production and Distribution, 1929-1932 
A, Foreign Countries 
B P Canada and the United States 

II. The Industry in the United States 

A. Number of Producers, Mill Capacity, Employment and Payroll 

B. Relative Consumption of Domestic and Imported Woodpulp 

III. The Industry in Canada 

A. Number of Mills and Mill Capacity 
3. United States Investment in Industry 

IV. United States Consumption 

A, Proportion Supplied by Domestic and Foreign Producers 
33. The Trend and Snd-of~Year Stocks 

C. By States and Areas 

V. United States Production and Trade 

A. Exports 

B. Imports 

1. The Tariff, and the Trends by Countries of Origin 

2. Ratios to Domestic Production 

VI. Effect of the Newsprint, Code 

A. On Employment and Payrolls 

B. On Costs of Production ,,.,..-- ~- 

VII. Important Competitive Factors 

A. Comparison of Average Import Values with Domestic Prices 

B. Effect of Foreign Exchange 

VIII. The Relationship of Domestic to Canadian Industry 
A. Cooperative Measures 





Preliminary Summary of Findings 



In spite of the many estimates that have "been made of the woxl<i. :'..'. 
lumber and timber resources, very little is known about even the .ap- 
proximate stands available for commercial exploitation. A recent esti- 
mate of the forest areas "by grand divisions gave 7,488,000,000 acres as 
the world total, of which 1,390,000,000 acres were located on. the North" 
American Continent. This same estimate mentioned the resources of the 
United States and Alaska to he 490,000,000 and 106,000,000 acres,, 
respectively, and those of Canada to be approximately 597,000,000 acres. 

In 1929 there were more than 35,000 manufacturing concerns located 
in the United States, which used lumber ang. timber as primary raw. ma- 
terials. The industry was fourth in the number of wage earners, and 
ninth in the value of its products, the latter being estimated at $2,- 
000,000,000. . • • 

Domestic production and exports of softwoods originate from forests 
located principally in the Pacific Northwest for Douglas Fir and Yfestern 
Pine, Spruce, and Hemlock, and in the Southeastern and Gulf states for 
long and short-leaf yellow pine. Hardwoods are produced and exported 
largely from forests located in the Appalachian mountains and in the 
south-central states. 


SAW TIMBER ■ .-j •*•"■' 

The United States ships sawn lumber and timber to 84 different 
countries. Of these, 8 countries regularly take over 70 per cent of 
the total. In 1929,. the United States led all other exporting countries - 
in the total board feet of sawn lumber and timber exported to wo re- 
markets. By 1934, the United States had dropped to fifth place, being 
surpassed by Finland, Russia, Sweden and Canada. 

The principal causes for the considerable curtailment in exports 
of sawn lumber and timber from the United States during the past five 
years have been the artificial trade restrictions imposed by foreign 
countries. Especially important have been preferencial tariffs (parti- 
cularly in the British Empire) , heavy customs duties, import quotas, ex- 
change control, monetary manipulation, and open embargoes. Other factors 
seriously effecting the trend have been the general reduction in consumer 
buying power, increased foreign competition, and weakness in United 
States export merchandizing methods. 


While lumber exports were 11 per cent of domestic production in 
19.29, the same exports supplied 20.7 per cent of the world consuming 
market. In 1932, exports were 13 per cent of the domestic production, 


a high point in the industry, "but applied only 10,8 per cent of the world 
market for the year. In 1934, exports uere again 11 per cent of domestic 
production, and supplied 12.3 per cent of the world market. 

While the volume of softwood lumber exports has fallen considerably 
since 1929, domestic production has likewise declined. Domestic produc- 
tion in that year amounted to approximately 28,345,000 thousand "board 
feet, and in 1932 to about 12,735,000 thousand, or a decrease of about 
55 per cent. Softwood exports from the United States declined from ap- 
proximately 5,285,000 thousand hoard feet in 1928, to approximately 
1,387,000 thousand in 1934, or a decrease of not quite 57 per cent. The 
ratio of exports to domestic production, therefore, remained substantial- 
ly unchanged - 12 per cent in 1928, and 11 per cent in 1934. 

In 1929 softwood lumber imports amounted to 1,643,232 thousand hoard 
feet, or 5-^- per cent of the softwood domestic production of approximately 
20,000,000 thousand hoard feet. By 1934 softwood imports had fallen to 
295,149 thousand hoard feet, or 2-1/3 per cent of approximately 13,000,- 
000 thousand hoard feet of domestic production. The 1934 imports were 
less than 18 per cent of the softwood imports in 1929„ 

Hardv io ods 

The United States is the largest world exporter of temporate zone 
hardwoods - the principal item of which is oak. In 1928, the domestic 
■production of hardwoods, amounted to some 5,798,000 thousand hoard feet, 
of which approximately 509,000 thousand, or 9 per cent, were exported. 
In 1934 the domestic production totaled about 2,758,000 million hoard 
feet, and the exports some 300,887 thousand hoard feet, or 11 per cent 
of the domestic production. 

Manufactured hardwood lumber imports into the United States consist 
almost entirely of insignificant quantities of tropical and sub-tropical 
hardwoods from Central America and the Caribbean, and some maple, birch, 
and similar species' from Canada. The principal hardwood lumber imports, 
however, are in the form of logs and squared timbers of mahogany and other 
cabinet woods from the Caribbean, Central America, the Philippine Islands, 
and the Orient. 


Of the remaining manufactured and semi-manufactured lumber and 
timber products important in the foreign trade of the United States, 
cooperage, box shooks, hardwood flooring, ply-woods and veneers, and 
ply-wood doors, are leading exports. Box shooks and cooperage exports 
have declined considerably since 1929, on account of the exchange con- 
trol regulations and other restrictions imposed by the leading purchasing 
nations. Ply-wood exports increased from 33,381,000 square feet, valued 
at $1,642,000, in 1929, to 61,621,000 square feet, valued at approximate- 
ly $1,700,000, in 1934. The exports of manufactured doors declined from 
some 2,140,000 units, valued at $3,987,000, in 1929 to 1,476,000 doors, 
valued at $1,678,000, in 1934. 


Leading imports of manufactured and semi-manufactured lumber and 
timber products consist of poles, pulp wood, pulp, paper, and shingles. 
Shingles imports, which consist mainly of red cedar shingles from British 
Columbia, declined slightly from 167,288,000 board feet in 1929, to 
110,094,000 in 1934. 


Article VIII of the Lumber and Timber Products Industry code pro- 
vided for the allocation of combined domestic and export quotas, to 
domestic producers by the divisional and sub-divisional code authorities. 
The industry through amendments sought revisions of the code to establish 
export prices, and the 1\IRA sought to modify the inclusion of export pro- 
duction in domestic quota allocations; but differences in opinion pre- 
vented the approval of these Droposals. 

In the case of divisions or subdivisions the raw material of which 
is imported, Article VIII of the Code provided for the establishment of 
quotas and allotments in terms of imports. In accordance with this pro- 
vision a system of import control was set up for the. mahogany and Philip- 
pine mahogany subdivisions. In this connection proposals were made for 
modifications - which, however, were not adopted because of differences 
of opinion. 

In view of the general increase in the United States export trade 
in sawn lumber and timber since 1932, and particularly during the period 
of production-export control and "cost protection' 1 regulations, it might 
be concluded that the operations in the industry were not affected by the 
code. It should be recognized, on the other hand, that this control was 
mainly effective because the domestic market was so highly protected 
against competition from imports; and on the other, that there was a 
minimum of control over the same industry as regards the substantial pro- 
portion of its production destined for export. 

At the same time it should be equally recognized, nevertheless, 
that the domestic industry did not increase its exports to world con- 
suming markets to the extent of its foreign competitors, so that there 
remains the possibility that the stabilizing factor of code control, 
particularly in view of increasing costs, may have created a competitive 
disadvantage, which would not have been encountered but for the limita- 
tions imposed by the code. 

In contrast to sawn lumber and timber, with its limited export quota 
allocation, the case of douglas fir doors was indicative of the problem 
arising in subdivisions without any export control, Douglas fir doors, 
under the subdivisional code, had a highly protected domestic market, but 
no control in any form over exports. There followed cutthroat competi- 
tion for export business, and price-cutting was freely indulged in in 
order to reduce the overhead of both domestic and export producers. This 
culminated in the imposition of dumping duties in several foreign countries. 


Changes in World Production, 19 29-1933 

Prom 1329 to 1932, the world production of newsprint decreased 14.1 

O r-7 A »ni 

per cent, c n ue chiofly to a sharp decline in Canada, the United States, and 
Germany. Production in Sweden and Japan during the same period declined 
a relatively small amount. On the other hand, production showed a re- 
markable increase in England, Finland and France, and substantial increases 
occured in Newfoundland and Norway. However, the countries showing in- 
creases constituted only 20.6 per cent of world production in 1929, and 
28.5 per cent in 1932. The United States and Canada, which together pro- 
duced in 1929 56,4 per cent, and in 1932 46.6 per cent of the world pro- 
duction, lost during the period 2.9 per cent and 6.9 per cent, respectively. 

The Industry in the United States 

The newsprint industry in the United States in 1934 was composed of 
twenty-five companies operating principally in the States of Maine, New 
York, Oregon, Minnesota, Wisconsin, and Washington, with an estimated ag- 
gregate capital investment of about 300 million dollars. In June, 1933, 
it employed 6,560 persons, with an annual payroll of $7,150,000. In 1929 
production was 1,409,000 short tons; while imports, mostly from Canada, 
were 2,423,000 short tons. Domestic consumption in 1933 approximated 
2,729,000 short tons, of which the United States produced 946,000 short 
tons, and of which 1,794,000 short tons were imported principally from 

' The Industry in Canada 

In 1934 there were approximately 24 Canadian companies engaged in 
the manufacture of newsprint. Production in 1929 was 2,729,000 short 
tons, of which 2,195,000 short tons or 80.4 per cent, were exported to 
the United States. In 1933 Canada produced 2,017,000 short tons, of which 
1,545,000 short tons, or 76.6 per cent, were exported to the United States. 
Although no official figures are available, the "Department of Commerce 
has estimated that in 1930 over 400 million dollars of United States capi- 
ta], was invested in the Canadian paper and pulp industry as a whole. This 
is over 50 per cent of the 794 million dollar capital investment in that 

Un ited Stat es Consumption 

• — ■ ' ' i ■ ■ ■ — — . ■ .. . d. i . ... 

In 1929, the United States consumed about 52 per cent, or 3,813,000 
short tons, of the total world production of 7,308,000 short tons; and in 
1933 it consumed 2,831,000 short tons, or 45 per cent of a world produc- 
tion of 6,275,000 short tons. 

In 1929 the domestic production constituted 36.7 per cent of the 
domestic consumption, whereas imports were 63.3 per cent. Of this latter, 
Canada and Newfoundland supplied 2,327,000 short tons, or 96 per cent. 
Domestic production in 1933 was 34.7 per cent of total consumption, while 
imports rose relatively to 65.3 -per cent, with Canada and Newfoundland 
supplying 91.4 per cent. 

The consumption of newsprint rose steadily to 1929, when it reached 
a peak of 3,813,000 short tons. It then declined progressively to a total 
of 2,711,000 short tons in 1933 - a drop of 29 per cent during that period. 
End of the year stocks at the mills, at publishers and in transit in 1930 
were 3,399,000 short tons. For 1933 the same figures were 2,567,000 short 



tons - a reduction of 24.5 per cent. ••' ' '• 

For 1928, the latest year for which data are available, the distri- 
bution of newsprint consumption among states was: New York, 22 per cent; 
Illinois, 12 per cent; Pennsylvania., 9 per cent; Massachusetts, 6 per 
cent; California, 6 per cent; Ohio, 5 per cent; Michigan, 5 per cent; 
Missouri, 4 per cent; Tennessee, 3 per cent; Minnesota, 2 per cent; In- 
diana, 2 per cent; Texas,. 2 per cent. The "consumption in this group of 
12 states rmounted to over 75 per cent of -the' total consumption in the 
United States. Although the total consumption of newsprint in 1933 was 
less than that of 1928, it is probable that the percentage relationships 
have not greatly changed. 

United, States Production and Trade 

Exports of newsprint from the United States are negligible, amounting 
to 19,000' short tons in 1929, -and to only 11,000 short tons in 1933. 

Production in the United States since 1926 has declined each year. 
The total decline from 1926 to 1933 was 44 per cent. Imports, on the other 
hand, increased approximately 30 per cent from 1926 to 1929. Thereafter 
they declined, and in 1932 and 1933 were about 3 per cent less than im- 
ports in 1926. Nevertheless, with the exception of the year 1932, the 
ratio of imports to domestic production, based on annual figures, in- 
creased steadily throughout the period 1926 to 1933. It rose from 110 
per cent in 1926 to 175 per cent. in 1929, to 178 per cent in 1932, and to 
190 per cent in 1933. . 

Standard newsprint is. imported into the United States' free of duty, 
under the Tariff Act of 1930. In recent years Canada has supplied 85 to 
90 per cent of the total imports. . Prom 1929 to 1933 there was a slight 
increase in the relatively small percentages coming from Sweden, Finland, 
and Germany. Based on 1929 statistics, about 90 per cent - of the newsprint 
produced 'in Canada was exported, and 80 per cent of this was shipped to 
the United States. Eighteen per cent of the newsprint exported from 
Sweden and 15 per cent of the exports from Finland were also shipped to 
this country. 

Effect of J ;he. , Newsprint Code 

t ... • 

The domestic Newsprint Industry's Code was approved November 17, 
1933. Data submitted by six individual companies indicated that the total 
costs of operations increased approximately 22 per cent in the period be- 
tween June-November 1933, and December 1933, through May 1934- before 
and during code operation. It was likewise indicated that the percentage 
of labor to total costs was 12.95 before the code, and 13.6 after the code 
became effective. Over the same interval employment was shown to have 
increased 13 per cent; average hours per week to have decreased 12 per 
cent; the average weekly wage to have increased about 1 per cent; and the 
average hourly wage to have increased 1.5 per cent. 

Important Competitive Factors 

: 0f particular significance in the competitive relationship between 
the United States and Canadian newsprint industries has been the rapid 



expansion in the latter country. This has "been mainly due to the fact 
that extensive tracts of timber and an abundance of advantageous water 
power sites have "been available to producers in Canada, under Government 
lease and at a comparatively low capital cost. The situation in the 
United States, on the other hand, has "been that substantially all sites 
affording sufficient supplies of timber and water power have been avail- 
able only at a capital cost considerably greater than in Canada. 

From 1926 through the first three quarters of 1932, newsprint prices 
fell less than the general wholesale price. After the first quarter of 
1933, however, newsprint did. not share in the general rise in wholesale 
prices. The average unit values of imports were only slightly below do- 
mestic prices, and the addition of transportation and selling costs would 
apparently have brought the net price to the consumer up to or above the 
level of the domestic price. "While the base price of newsprint in the 
United States declined 65 per cent from 1929 to 1935, the average unit 
value of imports over the same interval declined less than 42 per cent. 

The competitive position of the domestic newsprint industry, insofar 
as it was affected by the currency situation, was substantially better 
after the Code went into effect than it was from September, 1931, to 
April, 1933. The dollar value of the currencies of Canada, Sweden, and 
Finland averaged about 12 per cent, 30 per cent, and 40 per cent, respec- 
tively, below the par for the year 1932. Later in 1933, however, the 
currencies of Canada and Sweden returned almost to par, and that of Fin- 
land to within 10 per cent of par. 





Table of Contents 



I. The Importance of Foreign Trade to the Industry 

II. Trends in the Trade "by Geographical Grand Divisions 


I. Commodities Moving in Trade 

II. Organization for Foreign Trade 

III. Raw Materials 


I. Imports 

A. The Tariff 

B. The Trends by Principal Countries of Origin 

II. Exports 

A. Artificial Trade Barriers and Other Restrictions 
3. The Trend by Principal Countries of Destination 

C. Other Competitive Factors 


I • Semi-Manufacture s 

A. The Tariff and the Trend of Imports 

B. The Course of Exports and Recent Competitive Changes 

II. Woven Fabrics 

A. The Tariff and the Trend of Imports from Leading Suppliers 

B. The ' Course of Exports "by Items and Countries of Destination 

C. The Trend Before and After the Code 

III. Wearing Apparel 

A- The Trend of Imports and the Tariff 

3. principal Items and Countries of Origin and Destination 

C. Competitive Factors and Recent Changes in the Trade 



IV. Household Articles 

A. The Tariff and the Trend of Imports 

B* The Course of Experts "by Items and Countries of Destination 

V» Textiles for Agricultural and Industrial purposes 

A. The Importance of Imported Raw Materials 

1. The Tariff 

2, The Trend of Imports "by principal Items and Countries 
of Origin 

B. Course of Exports "by Commodities and principal Markets 

VI. Laces and Embroideries 

A. The Character and Trend of Imports 

1. The Tariff and Competitive Factors 
B« The Course of Experts and Changes in the Trade 





preliminary Summary of Findings 


In recent years the per capita consumption of cotton textiles for 
apparel purposes, particularly in the countries of the world with low 
standards of living, has "been declining; the development of synthetic 
textiles and the relatively lower price of silk have "been factors in 
this trend. The use of cotton for industrial purposes has increased 
greatly in the last decade. 

The indices of activity in the cotton spinning industries show 
great variations from country to country. It is clearly apparent, 
however, that activity in the United States, the United Kingdom and 
France shows a considerable decline over the 1925-1929 average. On the 
other hand, activity in Japan, India, and certain less important producers 
is above that of the "base period. The same situation is true of activity 
in the cotton weaving industries of those countries. 


In the United States, cotton has maintained its relative position 
in the consumptive demand for textile fibers only "because of the in- 
creasing requirements in agricultural and industrial fields. Attempts 
to alleviate the unsatisfactory conditions in the cotton growing states 
due to the great decline in the value of raw cotton - especially since 
1929, has resulted in the adoption of crop reduction programs, processing 
taxes, and loans by the Federal Government. The effect of these policies 
upon consumption and foreign trade, though widely debated, is still far 
from being known. 

In 1909 approximately 27 per cent of the total value of the foreign 
trade of the United States was in textile materials and manufactures; in 
1934, textiles accounted for only 18 per cent. Cotton textiles made up 
18 per cent of our total foreign trade in 1909, and 12 per cent in 1934. 
Foreign trade in cotton textiles represented 85 per cent of the trade in 
all textiles in 1909; and in 1934 it accounted for 68 per cent. 

Prior to the World War imports of cotton manufactures exceeded 
exports. The export excess of 405 million dollars in cotton materials 
in 1909 reached a peak of 1,078 million dollars in 1929; it declined to 
789 million dollars in 1927, and to 368 million dollars in 1934. As 
regards cotton manufactures, there was an excess of imports over exports 
amounting to 32 million dollars in 1919; this changed to an export ex- 
cess of 213 million dollars in 1919, which fell to 72 million dollars in 
1927 and to only 10 million dollars in 1934. 


Although cotton manufactures form an important segment of our foreign 
trade, exports constitute only a very small part of domestic production, 
and imports supply a still smaller percentage of domestic consumption, 
Tflhen narrowed down to main product classifications, the competitive 
situation is generally that each of the leading supplying nations exports 
certain specialties not produced in or not exported to the countries of 
destination to any great extent "by other countries. 


The Tariff Act of 1930 increased some of the duties on cotton 
manufactures, "but, in general, the increases were smaller than in any 
other groups. The equivalent ad valorem rate on imports of all cotton 
manufactures (not including yarn or coated fabrics) was 52 per cent in 
1934. Host of these rates are on an ad valorem basis; therefore, price 
changes do not complicate the determination of equivalent rates. The 
equivalent rate on yarn has been about 33 per cent since the enactment 
of the last Tariff Act, 

The principal cotton manufactures which are imported into the 
United States are cotton, gloves and mittens, and floor coverings. 
Although cloth is the chief item except in a few yarn count ranges, 
recent imports have not been of great direct competitive importance. 
In 1933 the United States Tariff Commission found that the leading 
imports which were substantial and more or less directly competitive 
with domestic production were tapestries and upholstery cloths, 
machine-made laces, embroidery specialties, machine-embroidered wearing 
apparel, floor coverings other than hit-and-miss and chenille, lace 
window curtains, and ornamented handkerchiefs. There was a considerable 
range of imported products in which there was some domestic production, 
but the bulk of the consumption was supplied by imports. There was still 
a higher quality range of products in which there was no domestic pro- 
duction - the consumption being almost entirely supplied by imports. 

The most significant change in recent years has been the decline in 
importance of the United Kingdom as a source of United States imports. 
In 1923 one-half of the total value of imports came from that country; 
in 1934 less than 20 per cent. The relative positions of Germany and 
France in 1934 (second and third sources respectively), have not varied 
greatly since 1923. Germany accounted for 19 per cent of the total in 
1934, and France 12 per cent. Japan and Italy are relatively more im- 
portant sources now than in the period 1923-1927, Due to the develop- 
ment of the embroidery industry in the Philippine Islands, the imports 
from that source have been steadily increasing. 


Cotton cloth, including duck, constitutes the largest single item 
of domestic export of cotton manufacture. Experts of wearing apparel 
are likewise important. Hosiery, formerly an important export item, 
has declined greatly. In most instances larger percentages of production 
were exported in 1929 than in 1923. The percentage of domestic production 
of the most important exports have been as follows during the years indi- 
cated: cotton cloth, including duck, 1929, 7.3 per cent, 1933, 4.1 per cent; 

-244- ^ 

hosiery, 1929, 10.7 per cent, 1933, 1*4 per cent; towelings, 1929, 7.2 

per cent, .1933, 1.1 per cent; counterpanes, "bedspreads, etc., 1929, 4,3 

per cent, 1933, 1.4 per cent; "blankets, 1929, 3.6 per cent, 1933, 1.4 
per cent; 

The Code for the Cotton Textile Industry, approved July 9, 1933, 
was the first code to go into effect. The .trend of imports and exports 
of most of the principal woven fabrics from six months "before this date 
to the corresponding period a year later is shown in the following 


Percentage char 

Lge for six months ending June 

30 as 



with corresponding 





previous year 











Cotton cloth (in- . 


+14 ... 


. +49 

+ 8 





- 8 




+ 7 


Tire fabric 


Negl i 

gible imports 




.. + 8 




Tapestries and other 











. +231 




upholstery cloths 

Pile fabrics and 


manufactures - 

Velvets and velvet- 









Other pile" fabrics 







Pile fabrics,* plushes, Exports 
velveteens, and 





+21 +20 

Table damask and. 

Imports Not available 


+46 -14 


Fabrics sold by the 
pound 1/ 

Exports ^66 -2 
Exports -31 -21 

1/ No corresponding import classification. 




-52 +7 - 1 



There were two of proceedings covering cotton manufactures under 
Section 3 (e) of the national Recovery Act: (l) Cotton floor coverings, 
and (2) Bleached cotton cloth. Zees were imposed on the importations of 
chenille, imitation oriental, and cotton floor coverings, in April, 1934. 
In addition, Japan voluntarily agreed to limit the exports to the United 
States of chenille, hit-and-miss, and "other" cotton floor coverings. 
The fees were removed in June, 1935, after the Supreme Court's decision 
on the constitutionality of the 11BA. The investigation with respect to 
imports of "bleached cotton cloth from Japan had not "been completed "before 
that decision. 

The index of exports of cotton finished manufactures stood at 27 
in 1934, "based on the 1923-26 average. The index of exports of all finish- 
ed manufactures was 155 in 1921, 38 in 1933, and 54 in 1934. In contrast, 
that of exports of cotton finished manufactures was 91, 26, and 27 in those 
same years. In 1934, about two-thirds of the total exports of cotton 
manufactures were cotton cloth. In the period 1923-1928 this proportion 
was somewhat less than this. It is apparent, then that exports continue to 
he mainly of standard products produced in large quantities "by machine 
methods, which find markets in countries not yet highly developed industrial- 
ly. Canada is the exception. 

Cuba, Canada and the Philippine Islands have "been the three most 
important markets for our exports of cotton manufactures. In 1923 the 
three accounted for about 40 per cent of the total to all countries, and 
in 1934 about 50 per cent. The Ottawa agreements of 1934 established rates 
of duty more substantially preferential to the United Kingdom. Exchange 
difficulties have been the principal factor leading to restrictions upon 
the payment for merchandise shipped - particularly to countries with which 
the United States has had an "unfavorable" trade balance. 

The confused situation in world currencies since 1930 is so tied up 
with the other factors influencing international trade in cotton manufac- 
tures that it is hard to segregate it. In general, exports from countries 
with stable currencies have declined to a greater extent than those from 
countries which have left the gold standard or otherwise depreciated. 
Undoubtedly the depreciation of the Japanese yen in 1931 was one of the 
factors greatly facilitating exports. It fell to two-fifths of the former 
parity with the dollar, but recovered to three-fifths after the United 
States abandoned the gold standard. 





Ta"ble of Contents 


It Early Developments 

A* Rivalry with France 

B. Mass Production 

C. Index of Growth of Trade t 


I. National Self- Sufficiency and Artifical Trade Barriers 

II*. Production in the United States and in Foreign Countries 


I. The Trend, 1929 - 1933 

II. Statistical Resume "by Product Groupings 

III. The Tariff and Trend of Imports 

A. Countries of Origin and Competitive Factors 


Exports . .. 

A* Ratios to Domestic Production 

Statistical Resume' "by Countries of Destination 

Competitive Factors 

1. Trade Barriers 

2. Lack of Highways and High Fuel Costs 



o Foreign Consumer Demand 

D« Foreign Factories and Assembly Plants 


I. Rates and Controls "by Countries, 1929 - 1935 
A» Effects on Foreign Purchasing Power 




preliminary Summary of Findings 

In the earl}?- stages of the development of the automotive industry 
France and the United States were close rivals for leadership. Beginning 
about 1910, with the introduction of mass production methods, the United 
States quickly advanced to first place. From 1916 through 1929, 80 to 
85 per cent of the annual world output of passenger cars and trucks was 
the oroduct of factories located in the United States. 


The decline in the United States share of the world market was not 
alone due to the general degression affecting all countries. Of far 
greater effect was the artificial direction of trade "between nations, 
which were forced to encourage self-sufficiency and to restrict their 
purchases mainly to countries purchasing from themselves, in order to 
avoid the devaluation of their currencies through the shipment of gold in 
settlement of their already adverse balances of payments. The foreign 
import res 1 mictions which were particularly aimed at such luxuries aa 
pa&senger ^ itcmo'biles ( still; so-considered outside the United States), 
took the form of heavy tariffs, high internal taxes, and severe controls 
over foreign exchange. 

In 1929 the United States automobile industry produced 85 per cent 
of the world output of automotive products; in 1932, 69.2 per cent; ajid 
in 1933, 71 jl per cent. During the same time interval, the United King- 
dom increased its share in the total world production from 3.8 per cent 
to 10*3 per cent; and France from 4.2 per cent to 7.1 per cent. The 
respective shares of Italy and Germany from 1929 through 1933, increased 
only slightly. Declines were registered for Canada, Austria, Belgium, 
and others* Preliminary figures for 1934 indicated that both Russia and 
Japan were fast becoming important producers in automotive product s. 

While automotive production for export increased from 1929 through 
1933 in the United Kingdom and France, the ratio of exports to produc- 
tion in this country declined from 13-? 7 per cent in 1929 to 10.1 per 
cent in 1932, and to 9.2 per cent in 1933, 


The total value of the United States foreign trade in automotive 
products declined from approximately $540,000,000 in 1929, to $77,000,000 
(the low point) in 1932, In 1933 it increased to about $91, 000,000; and 
in 1934 it then almost doubled to approximately $188,000,000. 



Imports of automotive products into the United States have always 
"been insignificant in comparison to domestic production. In passenger 
cars, for example, the greater part -of the imports probably consist of 
second-hand American made cars returned from Canada, Cuba, and Mexico* 
The tariff rate applied on imports is nominal, the domestic industry 
never having sought protection. The chief countries of origin of im- 
ports of assembled nev; passenger automobiles ar'e Great' Britain, France, 
Belgium, Germany, and Italy. Imports are usually restricted to a limi- 
ted number of high-priced cars having prestige on account of the trade 
name or special qualities in design or performance. 

• . .-■.'' 

Imoorts of automotive products in recent years have consisted main- 

■*■ • . ■ * 

ly of replacement 'parts or parts for assembly. Imports of completed, 
vehicles have declined steadily. The number imported in 1929 was 7.41, 
valued at $1, 180, 000; : and in 1934 it was 585 units valued at $185,500. 
In 1929 the value of imoorts of replacement and assembly parts was ap- 
proximately $2,284,000; and in 1934, about $175,000. 

In' 1929 there were 537,466 completed vehicles and chassis, valued 
at about $346,500,000, exported from the United States. In that same 
year, ' the value of the exports of replacement and assembly parts amounted 
to approximately $193,000,000. In 1'932, the low year in the industry, 
131,315 completed vehicles and chasis were shipped abroad, valued at 
approximately $35,700,000. The value of the exports of replacement- and 
assembly part's in 1932 was about $41,000,000. Exports of completed 
vehicles and chassis increased from 108,283, valued at $52,363,000,. in 
1933, to 238,441 units, valued at about $123,000, in 1934. The value- 
of replacement and'-assembly parts exported in 1932 was approximately. 
$38,418,000 - in 1934 about $64,000,000, 

The ratio of "exports to domestic production of passenger cars reached 
its /peak of 11; 3 per cent in 1927. The decline was uninterrupted through 
1933 when the ratio stood at 6.2 per cent. In 1934 it had increased 
'only slightly from the 1935 figures (6.6 percent). The peak year for 
trucks was 1929, when exports amounted to 36.9 per cent of the domestic 
production. The ratio declined to only 15.8 per cent for 1934. 
» ■ " . 

The Dominion of Canada and the countries of the British Empire 
have been the chief export market for the American automotive products© 
Since the high point, 1928-29, two changes have been evident: (l) 
the increasing relative importance of countries other than those of the 
British Empire, largely as a result of the Ottawa conferences and (2) 
the relative increase in parts as compared with finished cars. Parts, 
and chassis are mainly shipped abroad to American- owned branch factories 
and assembly plants© .... 

An important factor which may preclude the United States industry 
from regaining its former share of the world market is ,the wide di- 
vergence in the types of cars now being produced abroad, as a direct 
result of the encouragement by foreign governments of national self- 
sufficiency. This" is particularly manifest in changes in construction 
and design© The trend in the United States on one hand is for more 
cylinders and higher horse-power, and in Europe, on the other, to 
smaller cars with less horsepower. 



The decline in the United States exports of assembled automotive 
products has been in large measure due to the establishment of branch 
factories and assembly plants, necessary to escape the trade restrictions 
imposed by foreign nations. Should these barriers be once more relaxed, 
it is unlikely that the plants and factories will again be closed. Local 
laws in many countries have made it necessary for American manufacturers 
to establish subsidiary companies, in which certain proportions of local 
foreign capital are employed. By this method foreign governments have 
increased their interests, and the American manufacturers have lost a 
corresponding amount of autonomy. The lack of highways and high fuel 
costs continue to restrict the expansion of our exports to many areas. 

In the absence of code provisions directly relating to exports and 
imports, and in view of the marked decline in the unit value of cars and 
trucks produced during the period of operation under the code, it may be 
assumed that the Recovery Program did not hinder the domestic industry 
from taking full advantage of both foreign and domestic opportunities, 
whenever they became available. Coincident with the institution of the 
NRA the demand for automotive products, both in this country and abroad, 
began to improve. 


The high rates of dollar exchange in a number of countries in the 
early stages of the depression served greatly to accentuate the difficul- 
ties of foreign distributors and consumers in purchasing American auto- 
mobiles. Severe control measures caused our. exports to Australia, Argen- 
tina, Brazil and Spain to decline. The devaluation of the dollar early 
in 1933 operated to facilitate the resumption of exports to some extent. 




Table Of Content s 


I. Inadequacy of Existing Laws 

II. Anticipated Economic Conditions Necessitating Import Restriction 


I, Organization - 

A. The Imports Division 

3. The Schedule of Information Required in Support of 
Section 3 (e) Complaints 

II. Procedure 

A. Receiving and Handling of Complaints ■ ■ 

(a) Preliminary Contacts with Industry 

(b) Determination of Compliance 

(c) Review and checking of Information Submitted 
in Support of Complaints 

. (d) 'Supplementary Investigation 
(e) 1 Preparation of Surveys of Information 

(f ) Special Procedure in Handling Complaints Relating 
to Joint AAA-NRA Codes 

(g) Preparation of reports and. Recommendations to the president 
3. Investigation "by the Tariff Commission 

C. Tariff Commission Reports and Recommendations to the President 

D. Review of Tariff Commission Reports by NRA 

I. Commodities which were the Subject of Correspondence and Interviews 
II. Informal Complaints 

III. Formal Complaints 

A. Complaints Submitted only Partially in Accordance with Prescribed 
Procedure and not made the Subject of Investigation 

B. Complaints Submitted in Accordance with Prescribed Procedure 
and made the Subject of Investigation 

C. Summary Status of Complaints 5/27/35 

D. List of Complaints by Industry Groups 

E. List of Complaints by Economic Classes 

IV. Disposition of Investigated Cases 
V. Volume of Production, Employment, and Payroll Involved 





I. Tariff and Code Status 

A. Tariff Paragraphs • 

B. Height of Duties in 1933 

C. NRA Codes Involved 

II* Changes Following Adoption of NRA Codes 
A; In Production 

B. In Employment 

C. In Wages 

1. Hourly Wages 

2. Weekly Wages 

D. In Costs of Production (eight industries) 

1 . By Commo di t i e s 

(a) In Material Costs 

(b) In La^or Costs 

(c) In E:rpense 

(d) In Total 

2. By Companies 

(a) In Material Costs 

(b) In Labor Costs 

(c) In Expense 
(&) In Total 

E. In the Distribution of Cost Elements 

III* In Relation to Imports 

A. Comparison of Domestic Production and Imports, 1929-1934 

B. Principal Sources of Imports 

C. Comparison of Changes in the Costs of Production, Selling 
Prices, and the Unit Values of Imports for Periods Preceding 
and Following the Adoption of NRA Codes 




P r e 1 im i nar y Su mma ry Of Findings 


The section of the Tariff Act of 1930 which provided for changes in 
existing rates of duty by executive authority was not considered adequate 
to meet the emergency conditions expected to prevail in connection with * • 
the program of recovery provided in the National Industrial Recovery Act, 
for the reason that only such changes could "be made as might he found by 
investigation of the Tariff Commission to "be necessary to equalize dif- 
ferences in the costs of production of domestic articles and of like or 
similar foreign articles produced in the principal competing country. 
This view was "based primarily upon the extreme difficulty of ascertaining 
foreign and domestic costs during a period of rapid changes in costs, 
prices, and the exchange value of currencies. 

Other sections of the Tariff Act were considered inadequate he cause 
of the relatively narrow limits of their application. The Anti-Damping 
Act provided only for the imposition of special duties when the purchase 
price or foreign exporter's sales price was less than the foreign marl-ret 
value . 

luring the time when the Recovery Act was "being considered in 
Congress the view was expressed "both "by government officials and "by • 
representatives of indust^ that the effectiveness of the program pro- 
jected under the Act, involving increased prices and costs of production,* 
would he greatly restricted, if not destroyed, unless there were some 
provision giving the President authority to restrict imports, which would 
he in competition with domestic producers ohliged to comply with codes 
fixing maximum hours of labor, minimum wages, etc. Accordingly Section 
3 (e) was adopted as an amendment, providing for "broad discretionary 
executive authority to impose fees, quantitative limitations, or other 
terms and conditions on imports. It was stated that the amendment was 
intended to give the President the same author ity over imports that he 
was assuming over domestic production. 


An Imports Division was established in NRA by Office Order No. 33 
to handle all requests under Section 3 (e), and to formulate reports and 
recommendations to the President with respect thereto. 

The practical problem of administration made it necessary to 
require that requests for investigations be supported by specific facts. 
Accordingly, Office Order No. 37 was issued, containing a schedule of 
information designed to assist in the presentation of concrete statisti- 
cal evidence in support of complaints, including: 

(a) A statement of evidence of compliance with Title I. 

(b) Description and tariff treatment of the commodity. 

■ -253- • 

(c) Course of production, exports and imports during recent" years, 

(d) Employment and payroll data for the entire industry and the 
section competitive with imports. 

(e) The trend of prices. 

(f ) Costs of production prior to and following the adoption of 
NEA codes. 

In practice, the requirements of Office Order Ho. 37 were administer- 
ed with a. sympathetic consideration of the problems of industries, particu- 
larly of small unorganized industries. 

In general, the procedure followed in handling complaints under 
Section 3 (e) may he summarized as follows: 

(a) Preliminary conversations or correspondence with complainants 
for the purpose of assisting in the preparation and presentation of an 
adequate "body of essential information. 

(b) The determination of compliance "by checking the status of 
complainants under codes or agreements. 

(c) The review and checking of information submitted in support of 

(d) Supplementary research and investigation, including principally 
the assembly of information from other governmental agencies, from import- 
ers, and from such published or other sources a.s might "be available. 

(e) The preparation of surveys of information "based on all available 

(f) A special arrangement with the ^Agricultural Adjustment Administra- 
tion for the handling of complaints involving agricultural products 

(g) The formulation of draft-reports to the President, recommending 
that either the complaints "be dismissed, or that they "be referred to the 
Tariff Commission for further investigation. 

Executive Order Ho. 6353 of October 23, 1933, specified that when 
directed b^ the President, the United States Tariff Commission should make 
an immediate investigation, giving it precedence over all other matters, 
that it should give public notice and hold a public hearing, should make 
its findings of facts and recommendations to the President, and should 
transmit a copy of its report to the Administrator for Industrial Recovery. 
Section 5 of that Order directed that the Administrator recommend to the 
President, on the basis of the findings and recommendations of the Tariff 
Commission, such action as he might deem best devised to effectuate the 
policy of Title I of the National Industrial Recovery Administration. 




The correspondence and interviews of the Imports Division relative 
to import competition or to other foreign trade problems covered over 400 
separate commodities. 

The Imports Division received informal complaints involving 1C4 
commodities. The problems covered "by these complaints varied in character, 
and accordingly necessitated a varying amount of investigation and cor- 
respondence. These complaints were not presented in accordance with the 
prescribed procedure, and consequently no formal action was taken in 
respect to them 

Of the sixty-eight formal complaints received '"oy the Imports Division, 
fourteen were submitted only partially in accordance with the prescribed 
procedure. In these cases, the limited data . available either indicated. 
clearly that no basis for action existed or that they were entirely insuf- 
ficient to establish a prima facie case for action. 

Fifty— four formal complaints were received in accordance with the 
prescribed procedure, and were sup*ported by information indicating the 
existence of problems of competition sufficient to justify at least a 
preliminary investigation. 

Of the fifty-four complaints which were made the subject of 
preliminary investigation by the HRA., seventeen were recommended for 
further action, seven were dismissed, and eight were withdrawn "by complain- 
ants after preliminary investigation by the Imports Division, 

Twenty-one cases were pending at the time of the Supreme Court's 
decision in the Schechter case, Hay 27, 1935; of these several had only 
recently "been received. 

Of the seventeen cases recommended for further action, relief was 
granted with respect to four, and approved with respect to one; five were 
dismissed after investigation "by the Tariff Commission and seven Y;ere 
pending before the Tariff Commission. 

The 54 investigated complaints under Section 3 (e) were classified 
as follows "by industry groups: foods and kindred products, 5; textiles 
and their products, 1G; forest products, 4; paper and allied products, 2; 
chemicals and allied products, 7; products of petroleum and coal, 1; 
rubber products, 3; leather and its manufactures, 1; stone, clay, and 
glass products, 1; iron and steel and their products, not including 
machinery, 2; non-ferrous metals and their products, 5; and miscellaneous, 7. 

The 54 cases were classified as follows "by economic classes: 
crude materials, 1; crude foodstuffs, 1; manufactured foodstuffs, 4; 
semi-manufactures, 13; and finished manufactures, 29. 

Fiftjr-one cases, for which reasonably adequate data were available, 
involved 3,300 individual establishments in industry groups having a total 
domestic output in 1933 amounting to $995,000,000. The portion of these 
same groups of industries which was alleged to be in direct competition 



with imports, involved 1,600 individual establishments having an annual 
output in 1933 amounting to $350,000,000. 

Reasonably accurate information regarding the number of employees 
and payroll is available for only 38 complaints. These included industries 
employing over 500 persons, with a payroll of $300,000,000 in 1933; and 
of these, roughly, 95,000 with a payroll of $69,000,000 were alleged to be 
engaged in producing articles in direct competition with imports. 


The formal complaints under Section 3 (e) involved 62 separate para- 
graphs of the Tariff Act of 1930. 

Twenty-three formal complaints were, at the time of filing, based 
upon adherence to the PRA; the remaining 31 were based upon adherence to 
approved NRA codes. 

The Height of duties (ad valorem and equivalent) provided in the 
Tariff Act of 1930 for commodities which were the subject of formal 
complaint may be summarized as follows: Free of duty, fifteen; under 
25 per cent, ten; 26 to 50 per cent, twenty; 50 to 75 per cent, fourteen; 
76 to 100 per cent, four; 100 per cent and over, four. 

Of the 37 industries involved in complaints .under Section 3 (e), 
for which production data were available for periods before and following 
adherence to codes or agreements, 14 showed a decline in production 
ranging from one to 69 per cent; of these, four had declined 10 per cent 
r less; five, from 11 to 25 per cent; four, from 26 to 50 per cent, and 
one, over 50 per cent. Twenty-three showed increases r a nging as follows: 
10 per cent or less, seven; 11 to 25 per cent, eight; from 26 to 50 per 
cent, two; from 51 to 70 per cent, four; one, 121 per cent and one, 237 
per cent. 

Of the 32 industries for which employment data were available, 
seven declined as follows: four, under 10 per cent; one, 13 per cent; one, 
27 per cent, and one, 35 per cent. The remaining 25 increased as follows: 
three 10 per cent or less; ten, 11 to 25 per cent; nine, 26 to 50 per cent; 
three, 51 to 80 per cent. 

Of the 32 industries for which wage data were available, hourly 
wages declined in two cases and weekly wages in six cases. The declines 
in hourly wages were 1-1/2 per cent and 24 per cent, respectively, and 
the declines in weekly wages were less than 10 per cent in four cases; 
12 per cent in one case, and 24 per cent in another. The 30 increases in 
hourly wages Y/ere as follows: six cases, 10 per cent or less; fifteen 
cases, 11 to 25 per cent; four, from 26 to 50 per cent; and four, from 51 
to 75 per cent and one case, 112 per cent. The 24 increases in weekly 
wages were as follows: eight, 10 per cent or less; twelve, 11 to 25 per 
cent; and twenty-four, 11 to 25 per cent; and twenty-four, 26 to 40 per cent. 

The changes in costs following adherence to codes or the President's 
Reemployment Agreement by eight industries, covering eighteen commodities 
for which cost data have been summarized, were as follows: 


Materi al cost s: seventeen items, increased an average of 29 per cent; 
and one item decreased 0.9 per cent. 

Labor c osts: sixteen items increased an average of 31 per cent; and 
two items decreased an average of 2-1/2 per cent. 

Expenses or overhead: Eight items increased an average of 20 per cent 
six items decreased an average of 1.8 per. cent; and four items remained 

"unchanged. , 

Tota l costs: Thirteen items increased an average of 28 per cent 
and five items decreased an average of 7-1/2 per cent. 

A preliminary survey indicates that the percentage increase in selling 
prices was greater than the increase in total costs of production in 70 
per cent of the cases for which comparable data are available. The average 
unit value of imports rose more rapidly than domestic selling prices in 
about half of the cases, and less rapidly in the remainder. 


?he fifty-four investigated complaints involved eighteen different 
countries as principal suppliers of the commodities named in the petition 
for relief. Japan was the principal source of imports in twenty-two cases 
and Canada was next to importance, being the principal source of imports 
in four cases. 

The substantial increase in costs of production during the recovery 
program, generally speaking, was more than offset by the 'depreciation; of 
the dollar. In most of the cases devaluation increased the dollar cost 
of imports more than enoiigh to compensate the effects of the Recovery 
Program, Exception should be made of those cases involving Japan as the 
soijtrce of imports, for the reason that the exchange value of the yen 
declined to an even greater extent than did that of the dollar. 



Ta"ble of Contents 

I, The Anti-Trust Laws 

A. Sherman Act 

B. Federal Trade Commission Act 

C. Clayton Act 

II* The Export Trade Act or. 77ebb~Ponerene Lav: 

III. Section 5 of the National Industrial Recovery Act. An Exemption 
from the An ti- Trust 
A # Extent of Exemption 
B. Effect of Exemption 

IV. Laws Regulating Imports 

A # Uilson Tariff Act of 1394 

B. Anti-Dumping Act of 1921 

C. The Tariff Act of 1930 

1. General Provisions and Effect 

2. Special Provisions 

(a) Countervailing Duties 

(b) Equalization of Costs 

(c) Unfair Trade Practices 


I. Views Expressed at Committee Hearings and in Congressional Debates 
Regarding the Adequacy of Existing Tariff Measures 


I. The Text of Section 3 (e) 

II. Analysis of Provisions 

A. Range of Application Contrasted with Section 336 of the Tariff 

Act of 1930 
B» Conditions Precedent to Initiation of Action 

C. Conditions Precedent to Relief 

D, Scope of Relief 

III. Legal Problems Involved in Section 3 (e) 

A. Interpretation and Administration of the Section 

B. Constitutional Aspects of the Section 

1. The Sufficiency of the Legislative Standard 
2 m The Power to Impose Fees not for Revenue 



I, 'Hie Limits of Executive Authority 
II. The Technique of Review 
III. Construction of 'the Act as Applied to Foreign Trade 

IV. The Exporting Aspect of Foreign Trade 

A. Remarks on Existing Confusion 

B. The Distinction Between Product and Function 

C. The Distinction not Followed in Code Halting 

D. The Distinction Applied to the Resulting Confusion 

E. Summary of Argument and Specific Examples 

V. The Importing. Aspect of Foreign Trade 

A. Section 3 (a) as a Means of Controlling Imports' 

B f Administrative Limitations upon Import Regulation 

C. The Requirement of Representation and Assent 

Dm The Nature of Resulting Regulations 

E. Hie Importing Codes: Purposes and Limitations 




Preliminary Summary of Fi ndings 


Prior to the National Industrial Recovery Act, the so-called Anti- 
Trust Lavs regulated the entire field of interstate and foreign commerce, 
the Sherman Act prohibiting combinations in restraint of trade, and the 
Federal Trade Commission and Clayton Acts prohibiting, respectively, 
(l) unfair methods of competition, and (2) price discriminations, 
"tying" contracts, monopolies, or interlocking directorates. 

A limited exemption from these laws was granted by the Export 
Trade Act to associations engaged solely in the business of exporting. 

Section 5 of the National Industrial Recovery Act, creating an 
exemption from the provisions of the Anti-Trust Laws, was limited to 
those actions which were required to be performed by a code provision* 
In effect this Section limited the operations of the Federal Trade Con- 
mission to those instances in which "unfair methods of competition" 
coincided with code standards. Hie provision had little effect upon 
the Errpo.'rt Trade Act, however, since "export associations" were not 
codified, and continued to register with the Federal Trade Commission 
in order to obtain the benefit of the Export Act* 

The importing phase of foreign trade, however, enjoyed no such 
exemption, and was subject, in addition, (l) to the provisions of the 
Wilson Tariff Act, specifically applying the Sherman Act to importing 
combinations; (2) the Anti-Dumping Act, providing for additional or 
dumping duties when the invoice value of any import, whether free or 
dutiable, was less than the usual wholesale price in the country of 
origin, and (3) the Tariff Act of 1930. The latter levies duties at an 
average rate of 50 per cent upon a little over one- third of our total 
imports, and contains certain other regulations viz: Section 303, 
providing that foreign bounties on dutiable imports may be equalized 
by imposing a countervailing duty; Section 336, providing that duties 
may be raised or lowered when shown not to equalize the difference be- 
tween the foreign and domestic costs of oroduction; Section 337, pro- 
viding that the jjrivilege of importation may be denied to persons using 
methods of competition which are illegal and which restrain, destroy or 
injure domestic trade. 



Since one objective of the Recovery Program was to raise the 
domestic price level and to establish certain standards throughout the 
whole of industry, the possible insufficiency of existing tariff 
measures was considered by Congress. The following views were express- 

1. The President should be given authority to embargo imports 
(as in the 31ack-Connery 30-hour week bill), in order to preserve the 


American market for the American producer, 

2. The question of Tariff regulation was entirely foreign to 
legislation designed primarily to solve a domestic problem* 

3» The objective of the Recovery Program could not be attained 
unless the President had authority to deal with imports not produced 
under code n standards" © 

4# Such authority was provided in Section 3 (a) in conjunction 
with Section 5 (b)* 

Ho tariff provision was included in the Act as passed by the 
House, but the Senate Finance Committee proposed an amendment giving 
the Executive authority to embargo imports. Subsequently, the Senate 
approved the present Section 3 (e) as a substitute amendment, omitting 
the embargo feature, but providing broad authority to impose addition:! 
fees, quantitative limitations, or other terms and conditions* The 
sufficiency of the legislative standard was questioned at the same, tine, 
but was left undefended. 


Section 3 (e) was broader both in" the scope of its application 
and in the basis upon which action was : authorized, than any other 
provision of existing law relating to the import trade. It applied to 
articles on the free list, as well as those which were dutiable; 
it incorporated the broad concept of articles comp et itive with domestic 
industry as contrasted with like or similar artic les, thereby indicat- 
ing a willingness or intent to base restrictions on both direct and in- 
direct factors of competition; and the action authorized included ad- 
ditional fees, quotas, or other terms and conditions, in whatever 
amount or character the Executive should find necessary in order that 
imports might not endanger domestic standards, as contrasted with Sec- 
tion 336 of the Tariff Act, which contemplated merely the equalization 
of production costs. 

By way of limitation, there were certain conditions precedent to 
an action under Section 3 (e). Apart from the fact that the President 
might act on his own motion, the Section was available only to organi- 
zations which had complied with Title I, thereby insuring the repre- 
sentative character of the complaints. Moreover, the Section was not 
applicable unless articles wor e bein g imported in substantial quanti- 
ties or increasing ratio to domestic production, and on terms endanger- 
ing the maintenance of a. code standard* more threat of importation 
or possible danger was not sufficient. 

When a complaint complied with these conditions, the Section fur- 
ther required, an investigation and findings of fact by the President, 
after which he was authorized to specify the use of any one or more of 
the prescribed restrictions in such degree and combination as aopeaxed 


Two Constitutional questions are presented in Section 3 (e) which 
might have ^een decided adversely even had the Supreme Court, sustained 


the Recovery- Act in the Schechter Case* 

The first question involves the sufficiency of the legislative 
standard contained in the following quotation, "the entry thereof (the 
imports) shall not render or tend to render ineffective any code or 
agreement • " 

Apart from this standard, the President was unrestricted in his 
choice of the particular measure or measures to "be used, and the rela- 
tive use of each. This choice of the President appears to involve the 
exercise of opinio n, and if this is so, the Section contains a. delega- 
tion of legislative authority and is unconstitutional. 

The seco nd le^al question involves the right of Congress to impose 
fees for the purpose of regulation. One line of cases sustains this 
right (the prohibitive tax on olemargarine) , while the other view denies 
the right (the second Child Labor Decision). There is only the opinion 
of the Court as to what factors cause an article to be harmful or infur— 
ious, to distinguish between these two views* 

The identical question involved in the use of fees for the pur-pose 
of regulating imports in the interest of domestic production, is also 
presented in the processing- tax and coal-tax cases, which the Supreme 
Court will decide shortly. 


The function of the Executive under the Act was limited, and with-* 
in these limits a pattern of action was prescribed, with the result that 
action enlarging these limits exceeded the delegated authority, and 
action not conforming to tha pattern involved a misuse of authority. 

Code regulation of foreigs trade (Sectio: 3 (a) , by reason of a 
mass of conflicting provisions and exemptions, can only bu appraised 
by relating the action taken to the l imits and principles prescribed in 
the organic Act. 

In any construction of the Act as applied to foreign trade, ac- 
count must be taken of Section 7 (d) f in which the term "interstate and 
foreign commerce 11 is defined. This definition is identical with that 
of the Clayton Act, but it uses the clause "except where otherwise in- 
dicated," while the definition of the Clayton Act instead contains a. 
proviso that "nothing in this Act shall apply to the Philippines." 
This variation in phraseology did no change the meaning, but was appro- 
priate in view of the intervening Act of August 29, 1916. No other 
interpretation of the clause "except where otherwise indicated" is pos- 
sible, if the accepted tenets of construction are observed. 

Many conflicting code provisions regulating the export trade were 
approved -under the authority of Section 3 (a), without reference to 
the limitations implicit in Section? (d). The large number of amend- 
ments and exemptions with respect to these regulations demonstrates 
that the original concept of Section 3 (a) was mistaken* 'The mistake 
apparently lay in a failure to distinguish between product and function, 
even though this distinction is clearly implied in the terms of the 
Section. Actually, codes regulated function , but since they were t 
9347 ( 

constructed upon the basis of product , the same code often embraced 
divergent functions not always amenable to the reflations established . 
by the code. 

The corrective process (amendments, exemptions, and even original 
provisions in late codes), was often misused to create geographical 
limitations contrary to Section 7 (d), and in spite of the fact that 
laws and regulations of Congress are equally applicable throughout the 
entire .field over which Congress has regulatory power, When a given 
function is regulated, the regulation applies and controls wherever the 
function is found, Numerous examples might be cited of code provisions 
establishing lesser geographical limits within the. field of interstate 
and foreign commerce. 

When the need for a tariff provision was debated in Congress, it 
was suggested that Section 3 (a), -coupled with Section 3 (b), contain- 
ed all the authority necessary to control imports. Such a use of the 
Section would doubtless have involved a resort to Sections 4 (a) and 
4 (b), containing authority to prescribe codes and license industry, 
since importers would not , voluntarily assent to code provisions' which 
seriously restricted imports or limited the functions of importing. 'This 
was the view of the Legal Division, as indicated oy an Office Memoran- 
dum dated November 17, 1933, providing that imports might be restricted, 
and importers regulated against their wishes, only pursuant to the pro- 
visions of Section 3 (e). None-the-less, under Section 3 (a) such re- 
gulations were attempted, in spite of the proviso as to the right to be 
heard, and the lack of legal force in the absence of either representa- 
tion or assent. 

Importers did voluntarily sponsor a few importing codes to promote 
cooperative action, but these codes neither limited imports nor serious- 
ly, affected the function of importing.