BOSTON PUBLIC LIBRARY
3 9999 06542 004 2
NATIONAL RECOVERY ADMINISTRATION
DIVISION OF REVIEW
WORK MATERIALS NO. 17
TENTATIVE OUTLINES AND SUMMARIES OF STUDIES IN PROCESS
PART A: INDUSTRY STUDIES
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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5:61 C
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Industry Studies
Labor Studies
Trade Practice Studies
Administrative Studies
Legal Studies
Contributory Materials
) > > j
December, 1935
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CONFIDENTIAL
MEMORANDUM TO: SECTION HEADS December 30
19 3 5
SUBJECT: WORK MATERIALS NO. 17
TENTATIVE OUTLINES AND SUMMARIES OF STUDIES IN PROCESS
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.
It is expected that these TENTATIVE OUTLINES AND SUMMARIES
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
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STUDY SECTIONS OF THE DIVISION OF REVIEW
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.
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INDUSTRY STUDIES SECTION
Page
AUTOMOBILE INDUSTRY ~ (George Ifcrricki Jr)
Summary .........
Table of Contents ''.".*•'. . . . . . . '. 1
BITUMINOUS COAL INDUSTRY - (]P. I. Berquist)
Summary . . 18
Table of Contents ...... 11
CONSTRUCTION INDUSTRY ~ (P. A. Stone .& R. D. Winstead)
Summary ................. 30
Table of Contents 21
ELECTRICAL MANUF AC TURING INDUSTRY -.(I. W. Rose)
Summary ■ . . . . . 40
Ta'ole of Contents . • 35
FERTILIZER INDUSTRY ~ (A. P. 0!Donnell)
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?
IRON AND STEEL INDUSTRY ~ (A. &• White)
Summary . . . . ♦ 86
Table of Contents 82
KNITTIUG INDUSTRIES ~ (W. A. Gill)
Summary . 94
Table of Contents ' 88
LEATHER' AND SHOE INDUSTRIES - (W. J. Page)
Summary . . . ' 113
Table of Contents .' .' 99
LUMBER AND TIMBER PRODUCTS INDUSTRY - (Peter Stone)
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
TEXTILE INDUSTRY IN THE UNITED KINGDOM, PRANCE,
GERMANY, ITALY AND JAPAN- (Ivan V. Emelianoff).
Summary .......... 173
Table of Contents 170
TOBACCO INDUSTRY - (H. H. Titsworth)
Summary '. 179
Table of Contents 176
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WHOLESALE TRADES - (R. A. Dier & H. E. A"bt) Page
Summary . 193
Table of Contents 187
WOMEN* S CLOTHING INDUSTRY: • •
CONTRACT SYSTELI - (S. Trowbridge) ' ' '
Summary • 208
Table of Contents 202
OVERLAPPING EETWEMI DRESS 'ACT
COTTON GARMENT CODES - (S. Trowbridge)
Summary .....' 214
Table of Contents 210
DELEGATION OF POWER IN THE COAT
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 UNDER THE NATIONAL RECOVERY ACT -
(Foreign Trade Studies Section Staff)
Summary 221
Table of Contents 220
IMPORTS AND IMPORTING UNDER THE ACT - (David S. Green)
Summary 227
Table of Contents ...'..' 225
FOREIGN TRADE ASPECTS OF CERTAIN MAJOR CODED
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
THE ADMINISTRATION OF SECTION 3(e)* ~ (J. W. McRride)
Summary 252
Table of Contents .......'..'... ; 250
LEGAL ASPECTS OF FOREIGN TRADE REGULATION "
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
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THE AUTOMOTIVE INDUSTRY
Table of Contents
CHAPTER I. BACKGROUND OF THS INDUSTRY
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
1926
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-
amples)
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
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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-
facturer
D. Centralization of Manufacturing Plants
X. Pre-Code Problems Leading up to the Drafting of the Codes of Pair
Competition
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
CHAPTER II. OBJECTIVES OP THE NATIONAL INDUSTRIAL
RECOVERY ACT
I. A Statement of the Ten Policy Objectives of the Act
II. Elaboration of the Objectives as Contained in Later Developed Ad-
ministration Policy
CHAPTER III. FORMATION OP THE CODES OP PAIR
COMPETITION
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. )
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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
CHAPTER IV. LABOR
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
Effects
C. Arising from Codal Provisions
1. Irregularity of Employment
CHAPTER V. TRADE PRACTICES
I. History
II. Comparison with Other Key Industries
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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
CHAPTER VI. GENERAL EPPECT OP THE CODES ON
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-
tration
E. Voluntary Agreement of the Motor Vehicle Retailing Trade and
its Disposition
CHAPTER VII. AREAS POR FURTHER STUDY
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-
dination
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:
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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
of
(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
Burdensome
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-
ception
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
Remuneration
G. Technological Advance
1» Its Relative Impetus During Periods of Slack Demand
2, Its Necessary Function in Bringing About Increased
Productivity
H. The Trend of Capital Investment
1* Its Effect in Providing During Depression Periods, for
the New, and Higher, Industrial Peaks
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I. Investigation of the Method proposed in Leveling Production
Peaks
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-
ation
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
CHAPTER VIII. APPENDIX
Io Tabulations Covering Several rages (Summarized in the Body of the
Report)
II. Enumeration of Voluminous Detail
III, Exhibits
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AUTOMOTIVE ; INDUSTRY
Preliminary Summary 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
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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 areas9 an in-
crease in the number of competitors handling similar makes of cars. The
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"used car problem'1 and the ".factory-dealer relationship" were the two
major issu.es 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
merchandise.
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
accepted.
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,
9347
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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.
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BITUMINOUS COAL INDUSTRY
Table Of Contents
CHAPTER I. , INTRODUCTION
. 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
Problems
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?0 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
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D. Introduction of Special Legislation (Gui fey Bill) , its History
and Passage
E. Pur-noses and Provisions of Bituminous Coal Conservation Act of
1935
CHAPTER II. THE BITUMINOUS COAL INDUSTRY PPJOH TO NRA
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
Significance
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
CHAPTER III. THE CODE OF FAIR COMPETITION UNDER THE
NATIONAL INDUSTRIAL RECOVERY ACT
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
9347
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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
CHAPTER IV. ORGANIZATION CREATED TO EFFECTUATE THE CODE
I. The Industry1 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 Industry1 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
CHAPTER V. PRODUCTION, DISTRIBUTION, AND STOCKS
BEFORE AND UNDER THE CODE
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
9347
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III. Stocks in Consumers Hands, 1918-1934
A. Statistics of Stocking
B. Limited Available Storage Facilities and Reasons Therefor
CHAPTER VI. TRANSPORTATION
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
CHAPTER VII. WAGE RATES, HOURS,
EMPLOYMENT AND EARNINGS
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
CHAPTER VIII. WAGE DIFFERENTIALS BETWEEN AREAS;
THEIR HISTORY AND INFLUENCE ON PRICES,
MARKETS
I. Differentials in Basic and Contract Wage Scales, 1920 - 1933
II. Narrowing of Differentials North - South Under the Code, October,
1933.
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
-15-
V. Resume* of Sectional Feeling and Situation re Differentials at Ex-
piration of Code on May 27, 1935.
VI. Discussion of Other Differentials
CHAPTER IX. EFFECT OF CODE WAGES AND HOURS
ON LABOR COSTS AiTD PRODUCTIVITY
I. Code Wages and the 8-Hour Day as Reflected in Labor Costs, or Wage
Bill.
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-
tion
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.
CHAPTER X - COST OP PRODUCTION, SELLING. AND
ADMINISTRATION, UNDER CODE CONDITIONS
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.
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CHAPTER XI. CODE PRICES AND MARKETING
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-
down
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
Contracts
CHAPTER XII. REALIZATION FROM SALES
UNDER THE CODE
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;
Illustrations
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.
CHAPTER XIII. ECONOMIC CONSEQUENCES OF
CODE OPERATION
I. Administrative Weaknesses
A. Indefinite and Inadequate Bases Prescribed for Price-Fixing
B. Vacillating and Indefinite Policy with Respect to Factual Re-
porting
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
9347
• -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
)347
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BITUMINOUS COAL INDUSTRY
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.
9.747
-19-
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,
9347
-20-
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.
9347
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CONSTRICTION INDUSTRY
Table of Contents
CHAPTER I. INTRODUCTION
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 .
5f 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
Work
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
9347
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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
Contracting
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
Industry
1. A Functional Definition Approved for Heavy Construction
2. Overlapping with Other Construction Croups
3. Controversies ^rith External Industries
CHAPTER II. CHARACTERISTICS OF CONSTRUCTION INDUSTRY
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
Construction
4. The Coverage of the Census of Construction
Agencies Outside the Industry that Engage in Construction
r
9347
-23-
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
Industry
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
9347
-24-
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
CHAPTER III. TRADE PRACTICE AND INDUSTRY RELATIONS PROBLEMS
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
9347
-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
Industry
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
~26~
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
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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
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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
CHAPTER IV. MAJOR LABOR PROBLEMS, THE CODE PROVISIONS
DESIGNED TO MEET THEM AND RESULTS OP
CODE OPERATION
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
CHAPTER V. A SUMMARY OF POST-CODE DEVELOPMENTS IN:
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
CHAPTER VI. FURTHER PROBLEMS
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
9347
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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
9347
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G0NSTRUCTI0IT INDUSTRY
Preliminary Summary Of Findings
The Hi s tor;.'- of Construction 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 of the 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 Industry numbered between
3,000,000 and 3, 500," 000.
5|kg_..?age Volume of the Construction Industry, excluding the salaries of
office workers, amounted to approximately $3,370,000,000, in 1929.
S347
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The Number of Employees of General Building Contractors 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 Volume of Employees of General Building Contractors 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 Employees 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 Construction 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
$12,000,000.
The Volume of Heavy Construction was not estimated prior to 1925,
when it was approximately $1,816,000,000. This volume increased to apeak
9347
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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 Highway 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 potential Demand for Public School Buildings 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
1928-1929.
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 Code 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.
9347
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Heavy Construction 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 Overhead 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
months1 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
9347
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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.
9347
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ELECTRICAL MANUFAC TURING- INDUSTRY
Table of Contents
INTRODUCTION
CHAPTER I ~ HISTORY OF THE INDUSTRY
I # Power
A. Growth- of Electrical power Through Discovery, Invention and
Application
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
V.
(l) Undersea Cable Communication
B.
The Telephone
(l) Invention
(2) Development
(a) Physical
(b) Commercial
o.
The Radio
(l) Invention •
(2) Development
(3) Application
(a) Telegraphy:
(b) Telephony
(c) Broadcasting
Transportation:
A.
The Street Railway
(l) Invention
(2) Development
(3) Decline
3.
Electrified Railways
(l) Causes for Development
(2) Progress
0.
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
9347
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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. Industry During the Code Era. Brief Resume
VIII. Conclusions
CHAPTER II - FINANCIAL AND CORPORATE STRUCTURE
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
Company
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
CHAPTER III - PRODUCTION
I. General Discussion
II. General Statistics
III. Rank of the Industry
IV. Geographic Distribution
V. Size of Establishments by Value of Products
9347
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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
CHAPTER IV - LABOR
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
Phonographs
G. Hours and Hourly Rates in the Radio Industry
Rm 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
CHAPTER V - DISTRIBUTION
»
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
9347
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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
Industry
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# Manufacturers1 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
CHAPTER VI - UNITED STATES FOREIGN TRADE IN ELECTRICAL PRODUCTS
I. Exports
A» United States Exports in Electrical Goods
B# Importance of Electrical Exports in the Export Trade of the
United States
9347
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C. Position of the United States as an Exporter of Electrical
Products
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
9347
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ELECTRICAL MA1TUFAC TURING INDUSTRY
Preliminary Summary of Findings
CLASSIFICATION OF THE ELECTRICAL MANUFACTURING- INDUSTRY
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*
HISTORY OF THE INDUSTRY
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. In 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.
FINANCIAL AND CORPORATE STRUCTURE
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
9347
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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,
VALUE Q? PRODUCTION
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.
EMPLOYMENT, HOURS OF T70RK AND EARNINGS FOR FACTORY WORKERS
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.
9347
-4
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 ,
AVERAGE HOURLY BATES
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.
AVERAGE HOURS PER WEEK
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,
AVERAGE WEEKLY WAGES
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.
EFFECTS OF THE CODE
It appears, therefore, that under the administration of the Code of
Fair Competition the decline in average hourly wage rates from 1929 was
9347
~43~
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,
EFFECTS OF THE SCHECHTER DECISION
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
period.
EFFECT OF TECHNOLOGICAL CHANGES ON FACTORY EMPLOYMENT
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.
-44-
CODE PROBLEMS RELATING- TO LABOR PROVISIONS
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.
> ■■
DISTRIBUTION
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-
facturers1 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.
OPERATING COSTS FOR WHOLESALE ESTABLISHMENTS
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.
9347
~45~
FOREIGN TB&BB
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.
9347
-46-
FERTILIZER IilDUSTRY
Table of Contents
CHAPTER I. THE FERTILIZER INDUSTRY PRIOR TO NRA
I. Introduction: Definition of Industry
Am Sale Primarily to Farmers
E. Constituents of Fertilizer, Function of Fertilizer Elements,
Uses
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
CHAPTER II. LABOR
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
9347.
~47~
CHAPTER III. RAW MATERIALS AND THEIR UHOLESALE PRICES
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
CHAPTER IV. THE DISTRIBUTION AND PRICES OF FERTILIZER .
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
9347
-48-
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
aP Experience under the Open Price Filing Prevision
b. Schedules Piled during the Code
CHAPTEB V. CODE ADMINISTRATION
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
CHAPTER VI. CONCLUSIONS A1TD RECOMMSNEA.TIONS
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
9547
. ...~49-
V* Issues Requiring Further Investigation
Ac. Suggested Procedure
CHAPTER VII. APPENDICES
I, Documentary Evidence
II. Statistical Tabulations
9347
-50-
FERTILIZER INDUSTRY
Preliminary Summary of Findings
The Farmer the Sole Consumer of Fertilizer
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
9347
-51-
i. .
large capital investment, and;. the acid plants are rum continuously all
year.
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 a.re 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 Industry
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.
9347
.52-
INDUSTRY PROBLEMS PRIOR TO TIES N.R.A.
Impact of the Depression
Competition for the farmers1 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
resulted.
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
farmer1 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.
Labor 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.
9347
—53*.
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 ^UTILIZES IHDUS'IRY CODE
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*
Labor 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
effective.
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.
9347
-54-
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.
RESULTS ACHIEVED UBEER THE CODE
The Code Contributed to the Industry 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 farmer1 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 Industry1 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 Ts 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 Industry1 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 worker1 s weekly pay envelope decreased four-tenths
of one Tier cent.
~55~
The Industry* s Improved Financial Position During the 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)
Virginia-Carolina
Chemical Corporation
International Agricultural American Agri-
Corporation cultural Chemical
Co.
1935
$1
,277,578
1934
492 , 377
1933
762,828*
1932
783,509*
1931
369,606*
$552*787
634,317
705,119*
419,242*
509,174
$1,427,604
977,119
408,128*
1,189,461*
215,616*
Loss
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*
-56-
fertilizer to 2,250,000 farmers, comparatively few complaints of the
prices charged were made during the period of Code operation*
POST COLE CONDITIONS IN THE INDUSTRY
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.
USEFULNESS OP TKE FERTILIZER INDUSTRY STUDY
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.
~57~
THE , FISHERY INDUSTRY
Table of Contents
CHAPTER I. SCOPE 0? THE STUDY AND
DESCRIPTION OP TIS INDUSTRY
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
CHAPTER II. THE PRODUCTION OP THE PISHERY ICTUS TRY
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
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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
CHAPTER III. THE PRICES 0? FISHERY PRODUCTS
I, Prices
A. To Primary Producers
3. To Wholesalers
C. To Processors
II. The Price Deflation and the Financial Position of Pishing Enter-
prises
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
CHAPTER IV. ESTABLISHMENTS AND ENTER-
PRISES IN THE FISHERY INDUSTRY
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
CHAPTER V. PERSONNEL AND VOLUME OF EMPLOYMENT
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
9347
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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
CHAPTER VI. HOURS OP LABOR
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
CHAPTER VII. EARNINGS IN TIG FISHERY 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
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CHAPTER VIII. TUB FISHERY CODE STRUCTURE
AND THE WRITING OF THE CODES
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
CHAPTER IX. THE ADMINISTRATION OF THE FISHERY CODES
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
CHAPTER X. CODE PROVISIONS RELATING TO HOURS OF LABOR
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
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CHAPTER XI. MINIMUM WAGE PROVISIONS OF THE FISHERY CODES
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
CHAPTER XII. THE TRIES MJLOTICI PBOTISIOIS OF THE FISHERY C$B£S
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
CHAPTER XIII. TRADE PSACTICE PROVISIONS OF
THE FISHERY CODES: CONTINUED
I. The Prohibition of Discriminatory Prices
-62-
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
CHAPTER XIV. TEE CONTROL OP THE ATLANTIC MACKEREL CATCH
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
Q'
347
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FISHERY INDUSTRY
Preliminary Summnry of Findings
The Industry and The Codes. 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 Industry. 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
industry.
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
~64~
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-
ed.
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.
Personnel 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
93^7
r-65~
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
industries.
Hours of Labor and their Restriction, 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
personnel.
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
solved.
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 Provisions_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.
9347
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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
result.
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.
Q'XAT)
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HBAgBSAR INDUSTRIES
Table of Oonte nts
CHAPTER I. THE MILLIMEHY I1TDUSTRY
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« Infants1 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« Ea.se 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
9347
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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 Jobbers1 and manufacturers1 Association
Dm Philadelphia Millinery Association
E. millinery Manufacturers1 and Jobbers1 Association of Los Angeles
F. national Association of LadiesT Hatters, Inc.
&• Eastern Millinery- Association
H. Seattle Millinery Manufacturers* Association
J, Southern Millinery Manufacturers1 Association
K# manufacturers* and Wholesaler s1 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 Ladies1 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 Manufacturers1 Association
T7» Eastern Headwear Group
X. national Millinery Manufacturers1- Association
CHAPTER II, SSASOHALITY III THE MILLIKERY INDUSTRY
I. Causes of Seasonal Fluctuations
At, General Factors
Bf 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
9347
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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
CHAPTER III. THE PROBLEMS OF STYLE
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 Ideals5 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
9347
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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
CHAPTER IV. LABOR IN THE HEADWEAR INDUSTRIES
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
9347
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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
9347
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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
CHAPTER V. OCCUPATIONAL CLASSIFICATION OF WAGES IN THE MILLINERY 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
29 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
Costs
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"
9347
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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)
CHAPTER VI. THE SPECIAL MILLINERY BOARD
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
934-7
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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
CHAPTER VII. THE MILLINERY - KNITTED OUTERWEAR CONTROVERSY
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
CHAPTER VIII. MINIMUM AVERAGE WAGES IN THE HAT CODE
I. Statistics of the Hat Industry
II. The Genesis of Minimum Averages
III. Effect of Minimum Averages
CHAPTER IX. REPORT OF THE SPECIAL COMMISSION FOR THE CAP AND CLOTH HAT
INDUSTRY
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
9347
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KEADWEAR INDUSTRIES
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 1209000,000 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
only.
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
$78,000,000.
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~7£~
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 Establishments
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.
Prices
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.
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vThe .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
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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
1933,
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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 sa.me 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 deputy1 s office,
The use of the Special Millinery Board, therefore, made possible a great-
er degree of justice than would otherwise have been possible.
Q.'ZA'-)
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The fundamental issue in the Millinery— Knitted Outerwear Controversy
was a conflict between tv: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 process. The controversy arose out of the fact that the product
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 ,
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THS IROIT A" ID SEEL INDUSTRY
Table of Contents
CHAPTER I. HISTORICAL ffiENDS
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-
tions
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)
CHAPTER II. PRESENT SCOPE AND ChARCTSR OP THE INDUSTRY
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
CHAPTER III. INTERSTATE ASPECTS OP THE INDUSTRY
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)
9347
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CHAPIER IV. RAW MATERIALS OF THE IRON AND STEEL INDUSTRY
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-
sources)
CHAPTER V. FOREIGN TRADE ASPECTS
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
CHAPTER VI. FINANCIAL TRENDS - ANALYSIS BY COMPANIES
I, Changes in Financial Methods and Policy
A. Conditions of Major Companies, 1913-1933.
B. Effect of Degression 1920-21, 1924, 1929
CHAPTER VII. CORPORATE ORGANIZATION AND INTERCALATIONS
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
934-7
-84-
IV. Post-Code Position of the Industry
(Extent of discontinuance of co-.'e practices and attitude toward
voluntary agreements)
CHAPTER VIII. COMPETITION - PRICE AIT) IRAD1 PRACTICE PROBLEMS
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
Profits
B. Uniformity and Stability of Prices as Related to" Commercial
Prices and Government Contracts
CHAPTER IX. LABOR RELATIONS
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)
9347
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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
CHAPTER X. REVIEW OF CODE HISTORY AND ADMINISTRATION
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
powers)
IV. Administration Problems
(Contractual relations of industry signers of Code limited ordinary
problems of compliance and administration)
CHAPTER XI. POST-CODE DEVELOPMENTS AND EUTtHE PROBLEMS
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
9347
-86-
IROi: ASP STSSL INDUSTRY
. . .. " .
PrerLi;?Blnary . Stuamary^of- findings
Te chn i cal Change^
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
oroblemsc Competition between large units tends to produce one of two
extremes, either disastrous price wa.rs 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 ..as 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.
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KNITTING INDUSTRIES
Table of Contents
PART I
INTRODUCTION AND HISTORY OF THE INDUSTRY !S DEVELOPMENT
CHAPTER I. INTRODUCTION
I. Industries and Codes Covered
CHAPTER II. HISTORY OF THE INDUSTRY'S DEVELOPMENT
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
PART II
THE HOSIERY INDUSTRY
CHAPTER I. GENEPAL BACKGROUND
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
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IX. Full Fashioned Branch
A. Size of Pull Fashioned Establishments
X. Ease of Entering the Industry
CHAPTER II. FINANCIAL PROBLEMS
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. St2rle 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
2.
1-7
O.
CHAPTER III. MAJOR PROBLEMS - PRODUCTION CONTROL AND PRICES
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
CHAPTER IV. ADOPTION AND ADMINISTRATION OF THE CODE
I . Code Adoption
A. Introduction
3. Preliminary Steps
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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
CHAPTER V. EJECTS OP THE CODE
I. General Effects of the. Code
II. Effects of Code Abolition
III. Post Code Trade Association Activities
PART III
KNIT UNDERWEAR AND ALLIED PRODUCTS INDUSTRY
CHAPTER I. INTRODUCTION
I. Definition of Industry
II . Construction Details of Underwear
III. Knitting Variations
IV. History of Underwear Styles
CHAPTER II. THE INDUSTRY
I. Plants
II. Production, Values, Values per Unit
III. Processes and Methods of Manufacturing
CHAPTER III. LAB02 STATISTICS
I . Employment
II. Man~Hours
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III • Payrolls
IV. Wages
CHAPTER IV. PRODUCTION AND DISTRIBUTION
I. Introduction
II. Value of Raw Materials
III. Shift in Materials
IV. Value and Volume of Production
V. Costs of Production
VI. Seasonality Trends
CHAPTER V. SPECIAL PROBLEMS
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
CHAPTER VI. CODE AND CODE ADMINISTRATION
I . Formulation of the Code
II. Code Authority Representation
III. Finances
IV. Administration of the Code by N. R. A-
V. Compliance
CHAPTER VII. GENERAL EFFECT OP THE CODE
PART IV
THE KNITTED OUTERWEAR INDUSTRY
CHAPTER I. DEFINITION, DEVELOPMENT AND SCOPE OF THE INDUSTRY
I. Definition
II. Products
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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. Infants1 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
CHAPTER II. LABOR
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
CHAPTER III. PRODUCTION AND DISTRIBUTION
I. Raw Materials
II. Processes
III. Machines
A. Types
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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
CHAPTER IV. SPECIAL PROBLEMS
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
CHAPTER V. ADMINISTRATION OP CODE
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 KNITTING- INDUSTRIES
PRELIMINARY SDMMABY OP PINDINOS
PART I
INTRODUCTION AND HISTOEY OP THE INDUSTRY'S DEVELOPMENT .
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
time.
PART II
THE HOSIERY INDUSTRY
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 States1 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.
9347
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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.
PART III
MIT UNDERWEAR AND ALLIED PRODUCTS 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,
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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, Infants1 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.
PART IV
THE KNITTED OUTERWEAR ; INDUSTRY
The Knitted Outerwear Industry, a recent outgrowth of the Underwear
and Hosiery Industries, manufactures knitted apparel such as sweaters,
dresses and suits, infants1 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,
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confined to the New York area, is small, as only. 17 per cent of the
employees "belong to the union.
In 1923, the Industry1 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:
Year
Employment
Index
(1929-100)
. Average
Hours
per Week
Average
Hourly
Wage Hate
Average
Weekly
Earnings
1933
92.7
39
35.6
$14.08
1934
97.7
35
44.4
$15.65
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 Industry1 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-
tives.
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 Industry1 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
conditions.
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L2ATIIER irDUSTOT STUDY
feble of Contents
SECTION I - TEE TAHEIHG INDUSTRY
CHAPTER It IlTTHCi:lTCTIOl4
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
Z9 Mineral Tanning
4. Curr3ring and Finishing
Ea I.lechariization of Industry
P» Consolidation
Crm Integration
H« Specialization
CHAPTER II. SCOPE AND NATURE OE IKS INDUSTRY
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
39 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
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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 Producers1 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.
CHAPTER III. PRODUCTION
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*
9547
• -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.
CHAPTER IV. DISTRIBUTION
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. Manufacturers1 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
CHAPTER V. CONSUMPTION
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
-102-
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
CHAPTER VI. LABOR
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 Labor1 s participation in ownership, management, and profits
9347'
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E# Insurances, pensions, benefitsf annual v/age plans, and welfare
activities
F» Effect of the depression
G-» Pr encode, code, post-code status
CHAFER VII - COSTS AHD PRICES
I. Costs
A. Elements of cost
1, Hides and skins
2, Tanning materials and chemicals
8. Other materials
4« Fuel and "oovrer
5t 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
-p
Pre~code, code, post-code status
II* Prices
At Hides and skins
1* Introduction
2, By tj^pes
3« Yearly and monthly
4» Commodity exchange
5» Significance of packers1 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 "buyers1 "ores sure
(d) Destructive price-cutting -Dractices
(e) Cheaper gra.de s and substitutes
60 Mark-up methods
7» Importance of speculative feature
D. Effect of the depression
E* Pre-code, code, post-code status
CHAPTER VIII.- IEUDE PRACTICES
I . Te rra s and disc oun t s
II. Uniform sales contracts
9347
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
CHAPTER IX - ERA2S ASSOCIATIONS
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
CEAP1E2.X ~ FINANCIAL ASPECTS
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
9347
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CIIAPTEH XI ~ URA. AFD THE LEATHER INDUSTRY
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
SECTION II , THE BOOT AND SHOE LiAlTOTJiCTDHIHO
IIIDUSIKY (Other Than Hiibber)
CHAPTER^. INTRODUCTION
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
la 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
CHAPTER II - SCOPE AKTO NATURE OF IKE INDUSTRY
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 noyi
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
Q.7ZL7
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 Producers7 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
CHAPTER III . PHODUC TI Oil
I. Materials
A, Leather
1.
Introduction
2,
bottom stock
-
(a) Types used
(b) Imports
(c) Total consumption
1-7
Uppers
(a) Types used
(b) Imports
(c) To taxi consumption
4.
Linings
(a) Types used
(b) Imports
(c) Total consumption
Bi Rubber
1.
Introduction
2.
Composition soles
(a) Types used
(b) Total consumption
Zm
Heels
(a) Types used
(b) Total consumption
Cm Te:
:tiles
1.
Introduction
2m
Cotton
(a) Linings
(b) Interlinings
(c) Stays
(d) Total consumption
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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
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X. Effect of the depression ; ■'
XI • Pre— code, Code, and Post-code status
CHAPTER IV - DISTRIBUTION
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 ers1 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
CHAPTER V CONSUMPTION
I. Historical background
II. Total volume and value of domestic consumption; classified by
outlet:
A, Shoe stores
B» Department stores
C. General merchandise stores
D# Mail-order houses (catalogue only) '
E. Family clothing stores
P. Lien1 s clothing and furnishing stores
&• Dry goods stores
H. Tibmen1 s ready-to-wear specialty stores
I. Variety, 5 and 10 and to-a-.dollar stores
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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
CHAPTER VI , ' LABOR'
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
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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
activities
F. Effect of the depression
G-n Pre-code, Code. Post-code status
CHAPTER VII« COSTS MB PRICES
!• 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-
facture
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 buyers1 pressure
(a) .Chain storo groups
(b) Mail order houses *
(c) Department stores
(d) Influenco of hide and skin market ♦
9347
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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
CHAPTER VII I > IRAPE PRACTICES
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
CHAPTER IX. TRADE ASSOCIATIONS
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
Dm 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
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VII. Effect of the depression
VIII. Pre— code, Code, Post-code status
^yPIOJX* FITlAilCIAL ASPECTS
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
CH-iPTER XI* MA MTD THE BOOT AII3D SHOE i.IFG. INDUSTRY
I, Formulation of the Code
II. Summary of codal provisions
III. Administration of the Code
IV* Ao~oraisal of the effects of the Code
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LEATHS.l AITS SHOE I FPUS TRIES
Preliminary Summary of Findings
TS LEATHER BAElTIfiG II 07ST5T
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.
1925
100,0
1935
36.4
1934
92.9
1935 (1st quarter)
100.1
The oro duct ion on value basis was:
1929
$481,340,299
1933
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:
1933
44,500
1934
49,690
(1st quarter)
«J.'- , OJ.C
Tills represents an increase of employment under the Code of 15 per
cent. Employment indices were as follows:
1929
100.0
1952
75.7
1932
83.5
1954 1935
(10 months)
9.4 102.8
OQ
m
Dotal payrolls were as follows:
1955 1934
1935
$45,658,000
(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.)
100.0
89.4
73.1 58.5 67.9 83.9 96.4
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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 recentlye 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 2f0 - 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
misunderstanding.
The Tanners1 Council of America, the national organization of the
Industry is an efficient and strongly representative association.
Compliance was excellent 0 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.
TEE BOOT AND SHOE MANUFACTURING- INDUSTRY (Other Than Rubber)
The manufacture of boots and shoes (other than rubber) is not only
one of the oldest and most important consumers1 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 States1 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
179,000..
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.
9347
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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 Hourly Wage. This increased 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 increased 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 ' increased 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 Administration. The assessment of the Industry1 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.
9347
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LIMBER ATO TDIBER PRODUCTS INDUSTRY
Preliminary Summary of Findings
CHAPTER I. DESCRIPTION OP THE INDUSTRIES ATTD SCOPS OP STUDY
I. Descri ption of the Industries
A. Composition: Principal Products
3D Definition: Census and Code
Cc General Production and Logging Methods
D0 Jurisdiction and Production of Code Divisions
II. Scope of Study
CHAPTER II. STANDING TIMBER
I. Forest Area and Commercial Stand
A. Total, Commercial, Saw Timber, Cordwood, and Restocking Acreage
B. Total, Commercial, Saw Timber, Cordwood, and Restocking Stand
C0 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
D0 Code Regulations and Significance
E. Code Attainments
CHAPTER III. LOGGING AND MANUFACTURING
I. General Characteristics
A. Species and Range
B. Logging Methods, Mill Size., and Equipment
C. Production, Capacity, Shipments, Stocks
D6 Depletion of Stand and its Effects
II. Capital and Credit
A. General Financial Structure
Bo Credit
9347
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
Ctt 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
D6 Demand Factors
IX. Cost of Production and Mill Realization
A. Production Cost Determinants: Logging, Transportation, Mill
Cost, etce
B. Cost under NRA
C. Mill Realization
X. Employes, Wages and Hours
A0 Employment: Types, Seasonality, Technological, Relation to
Production, etc0
B. General Lahor Conditions
C. Wages and Hours: Regions, Shifts,' other Variables
9347
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CHAPTER IV. DISTRIBUTION
I. Producers and Consuming Markets: Softwoods
A. Shipments, 'by Volume and Value
3. Consumptionf "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
Distribution
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
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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
CHAPTER V. CODE REVIEW
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
9347
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LUMBER MD TIMBER PRODUCTS INDUSTRY
SUE MLY 0? FINDINGS
IHI35R gTOSRSEIP.
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 yea.rs 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.
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NUkBER AND CAPACITY OF MILLS
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
operations.
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.
PRODUCTION AND SHIPMENTS
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.
CAPITAL AND CREDIT
The capital assets of this industry, according to the Bureau of In-
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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.
COSTS AND REALIZATION
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.
LABOR
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
1929.
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OHANNELS OF DISTRIBUTION
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 CODE
'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.
Employment
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^_
Prices
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.
Conservation
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-
cision.
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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 *
9347
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THB MEN'S CLOTHING- INDUSTRY
Table of Contents
CHAP-TEE I. DEFINITION AND SCOPE OP INDUSTRY
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
CHAPTER II. CHARACTERISTICS OF THE INDUSTRY
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
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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
CHAPTER III. PRE-COBE PROBLEMS OP THE INDUSTRY AND WRITING-
OP THE CODE
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
CHAPTER IV. CODE ADMINISTRATION + ORGANIZATION MD PROCEDURE
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
9347
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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
CHAPTER V. LABCR UNDER THE COLE
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. Advisers1 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
CHAPTER VI. INTERPRETATIONS AND INTERPRETATION PROCEDURE
I. Interpretations Submitted for Administrative Approval'
II. Interpretation Publicity
III. Administrative Orders Approving Interpretations
9347
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IV. Suggested Interpretations not Approved "by Administration
V. Classifications
CHAPTER VII. TRADE PRACTICES '
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 Retailers1 Objections
VIII. Proposed Fair Trade Practices for Uniform Manufacturers
A. Fair Trade Practices for Uniform Manufacturers Approved by
the Federal Trade Commission
CHAPTER VIII. FINANCIAL PROBLEMS OF THE INDUSTRY
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
3347
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IVt Financing
A* Initial Investment
2Q Sources of Credit - Merchandise Suppliers and Banks
C» Terms 'Granted "by Mills
1. Effect of Selling Policy of Mills
Do Governmental Aid
E0 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
20 1934 Operations
3„ 1933 Operations
Bo Pressure from Retailer - Returned Goods and Markdb"wns
C* Planning and Control
lo Cost Accounting
29 Irregular practices
3V Standardized Accounting Need
- VI • Labor Problems
Ao Labor' Dispute Direct and -Indirect
B©' Industry Reaction to Labor Problem
VI It Conclusion
APPEiDIXo JURISDICTIONAL CONFLICT WITH COTTON GARI.ZSImT INDUSTRY
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
9347
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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
9347
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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 Cotton 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
included
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
off-pressers
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
discussed
A. This, as a final solution of the problem, would from
all indications, have been universally accepted and
approved
9347
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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,
9347
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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 Hen1 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>rior 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
9347
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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
9347
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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.
9347
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PAPER INDUSTRY
Table of Contents
CHAPTER I. INTRODUCTION
The
Paper Industry
A,
Definitions
If .Paper and Pulp
2. Newsprint
3. Paperboard
3*
Historical Development
1. World Industry
i
2. Domestic Industry
C.
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
CHAPTER II. SCOPE AND CHARACTER OF THE INDUSTRY
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, 3f 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
lt 2, 3, 4 and 5 (Same as for A)
E» Each of Several Regions
1, 2, 39 4 and 5 (Same as for A)
P. Rural and Urban
1, 2, 3, 4 and 5 (Same as for A)
9347
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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
30 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
lf 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
9347
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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
or?
47
-141-
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
CHAPTER III. PRICES
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
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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
Rigidity
B. Comparisons Paper Price Movements with Other Commodity Price
Trends
C. Comparisons Paper Price Movements with Raw Material Price
Trends
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
Prices
C. Comparisons of Conditions in Paper Industry with Those in Other
Industries
!• 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
Methods
9347
-143-
(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
CHAPTER. IV . -XABOR .
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
9347
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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
Years
1. Compare with Indices of Wage Rates all Labor and Similar
Industries
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
C9 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
9347
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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
CHAPTER V. FINANCIAL ASPECTS
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
9347
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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
CHAPTER. VI. INDUSTRIAL ADMINISTRATION AND CONTROL
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
9347
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
CHAPTER VII. THE NRA AND THE PAPER INDUSTRIES
If 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
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PAPER INDUSTRY
SUMMARY OF FINDINGS
I . INDUSTRY SCOPE AND CHARACTER
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.
PRICES
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
Industry
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
Industry.
-149-
This price pattern1 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.
LA30R
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~
ber5 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. ■
INDUSTRIAL ADMINISTRATION -AND CONTROL
Since 1878 the Paper Industry has been characterized "by very active
trade associations, dealing with practically all phases of 'industrial
problems.
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
activities.
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. "*"' .-.:*. ,
q.^4.7
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RUBBSR INDUSTRY
Table of Contents
CHAPTER I. ^ INTRODUCTION
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
■CHAPTER II. ECONOMIC ASPECTS OP THE INDUSTRY . .
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
Divisions
C. Unpr of i tab.il 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
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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
Ef Increasing Productivity of Labor in Tire Manufacturing
F« Displacement of Labor Due to Technological Changes
G-. Summary of Employment, Wages and Man-Hours
CHAPTER III. SPECIAL PROBLEMS IN THE INDUSTRY
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 Growers1 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
Competition
CHAPTER IV. INDUSTRY UNDER THE CODES
I« Code Formulation
A* The Number and Diversity of Codes Proposed by Groups and
Divisions
B. Final Consolidation of Manufacturing Codes and Drafting of
Separate Distributing Code
C. The Industry1 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
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B. Modification, Exemptions Applied for and Granted and Their
Effect
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
lf Dissimilar Types of Distribution
2. Unnecessary Range of Quality Lines
3« Wide Range in Buying Prices of Retailers
4. Price Wars and Industry1 s Pailufe in Efforts to
Stabilize Itself
B. The Situation Leading to the Truce Agreed Upon Under Section
4(a)
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-
tions
Pt Subsequent Trend to Lower Price Levels
CHAPTER V. FURTHER PROBLEMS IN THE INDUSTRY
I. Continued Technological Displacement of Labor
II. Contraction of Markets and Demand
III. Progress in Development of Rubber Substitutes
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BIJBBER INDUSTRY
' 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.
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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. Ts 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.
9347
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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.
9347
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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.
9347
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TEXTILE INDUSTRY
Table of Contents
CHAPTER I# GENERAL BACKGROUND
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
Branches
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.
CHAPTER II j MACHINERY AND EQUIPMENT IN THE INDUSTRY
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-
production"
B. Schemes for Controlling the Installation of Additional Capacity
and Promoting the Elimination of Worn-Out Equipment
9347
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1. Foreign textile schemes and efforts
2. . .American textile schemes and efforts, "both within and
without the N.R.A.
CHAPTER III. TEXTILE PRICES
I. G-eneral Characteristics
A.. Flexibility- Lack of "'Control1'
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 Consumer1 s Textile Dollar Between 'the Agencies of
Production, Distribution and Financing"
CHAPTER:-W. PRODUCTION CONTROL IN THE INDUSTRY
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
9347
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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 •
Machinery
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 ~
Reasons
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
ORAPTEB V. DISTRIBUTION AND FINANCING IN THE INDUSTRY
I. "One of the Most Chaotic Distributing Systems in the Capitalist
World"
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
9347
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CHAPTER VI. FINANCES OF THE 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 . .'•
CHAPTER VII. LABOR IN THE INDUSTRY
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. Lahorfs 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
9347
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(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
Improvements
D» Geographical Differentials
E* Depressed Segments and Areas
F. Night Work
G* Child Labor* etc*
H# Government participation in Control of Employer-Employee
Relations*
CHAPTER VIII* INDUSTRIAL CONTROL AND REGULATION IN
THE INDUSTRY
£• 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
Materials
G# Government Purchases of Textile Goods and Products Made
Therefrom
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
Problems
C» Codal Experience in Industry Government
D» Delegation of Power, etc*, in Te-tile Codes
E. The Aftermath; Present Industrial Regulation
CHAPTER IX. INTERNATIONAL ASPECTS AND FOREIGN COMPETITION
It Exports, Imports and International connections, Textile Raw
Materials and Products
9347
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II. Foreign Control of Textiles and Its Relation to, and Connection
with, the U. S. Textile Situation
CHAPTER X. THE FUTURE OF THE imUSTRY "AFFECTED WITH
THE PUBLIC INTEREST"
I. The 1-T.R.A. Experiment vs the Previously-Existing, Partial "Laissez
Faire" System .
II. Choices for the Future, and Implications thereof
9347
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1?Hg TmPILE. imuSTRY
Preliminary Sir. .imary of Findings
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 noy 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.
9347
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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.
Textile 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 due 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
9347
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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 usuallj7" 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
equipment.
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.
Distribution and Financing
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
9347
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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.
Labor
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
amusement.
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
-168-
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 mat 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
discussed.
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 Japan1 s situation,
where textiles form 47.6 per cent of all imports, and 62.9 per cent of all
exports.
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.
9347
-169-
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.
Conclusion
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.
9347
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TEXTILS INDUSTRY IN TH5 UNITED KINGDON,
PRANCE, GERMANY, ITALY AND JAPAN
Tahle of Contents
CHAPTER It TEXTILE INDUSTRY IN THE UNITED KINGDOM
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
CHAPTER II. TEXTILE INDUSTRY IN PRANCE
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
»
9347
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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 . ;
CHAPTER III. TEXTILE INDUSTRY. IN GERMANY
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
Germany
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
CHAPTER IV. TEXTILE INDUSTRY IN ITALY
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,
Fm 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
CHAPTER Vr TEXTILE INDUSTRY IN JAPAN
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
934-7
-173-
TEXTILE 'INDUSTRY IN TIIE UNITED' KINGDOM,
FRANCE, GERMANY, ITALY AND JAPAN
SUI.5.LARY OE FINDINGS
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
country,
(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:
EMPLOYMENT IN THE TEXTILE INDUSTRY AS A PRECENTAGE OE TOTAL
. VOLUME OE EMPLOYMENT.
Countries Year
Per Cent
Basis of Comparison
England
1931
6.3
France
1926
...4.5
Germany
1927
9.0
Italy
1927
16.0
Japan
1926
53.2
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:
9347
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SHARF OF TEXTILE GOODS IN FOREIGN TRADE
Countries
England
France
Germany
Italy
Japan
Years
Average 1920-33
Average 1928-35
1933
1933
1933
Value of Textile Goods as Percentage
of the Total Value of Foreign Trade
Imports Exports
(Per cent)
(P
er cent)
17.1
36.5
21.0
19.3
20.4
10.2
23.9
33.1
47.6
62.9
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
9347
.-. -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 in 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".
Q
347
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TOBACCO INDUSTRY
Table of Contents
CHAPTER I. • THE DEVELOPMENT OF THE LARGE CORPORATIONS
IN THE TOBACCO INDUSTRY
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
CHAPTER II. LABOR IN THE TOBACCO INDUSTRIES: ECONOMIC ASPECTS
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
CHAPTER III. INTEGRATION WITH AGRICULTURE
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
9347
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CHAPTER IV. FOREIGN COMPETITION AND' TRADE BARRIERS
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
CHAPTER V. TAX EETOEUE
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
CHAPTER VI. THE SMALL COMPANY
I« The Small Leaf Dealer
II. The Economic Position of the Small Manufacturer
III. The Position of the Small Distributor
CH&PQER VII. DISTRIBUTION
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
CHAPTER VIII. THE STATUS OP THE CONSUMER
CHAPTER IX. THE DEPENDENCE OF THE SOUTH ATLANTIC STATES ON TOBACCO
AND COTTON IN AGRICULTURE AND MANUFACTURE
CHAPTER X. THE NRA AND THE TOBACCO INDUSTRY
I. Conditions Prior to the president's Reemployment Agreement in
the Seven Divisions of this Industry
9347
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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
9347
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TOBACCO INDUS IRY
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 7Tith .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
CHAPTER I, THE DEVELOPMENT OP THE
LARGE CORPORATION IN TEE TOBACCO INDUSTRY
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).
Sources
(1) Income Tax Unit, Bureau of Internal Revenue
(2) Prom published sources, including Moody1 s and Standard Statistics
II. The 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.
-180-
IV. The ?,e mime rat ion of Officers and Directors; 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.
CHAPTER II. LABOR IN THE TOBACCO INDUSTRIES: ' ECONOMIC ASPECTS
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.
9347
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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 irages, 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 Industry : 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 ization; 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-
ing.
Sources;
1. Pield Surveys loy .Bureau of Labor Statistics, Department of Labor,
covering;
The Cigarette, Snuff, Chewing and Smoking Tobacco Industry. T-ro
surveys, during code and post-code.
The Tobacco Leaf Dealers (Export). Two surveys during code and
post-code.
The Cigar Manufacturing Industry. Survey not yet completed.
2. Questionnaire to Wholesale Tobacco Trade.
CHAPTER III. INTEGRATION WITH AGRICULTURE
I. The Loose Leaf Tobacco and Auction Warehouse; 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
9347
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
dealers,
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,
CHAPTER IV. EOREIC-N COMPETITION AMD TRADE BARRIERS
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,
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' . CHAPTER V. TAX HEVENUE
I . Tiie Unusual Importance of the Industry as a Source of 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-
ers1 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-
ports.
CHAPTER VI. . THE SMALL COMPANY
I. The small Leaf Dealer; 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.
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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,
CHAPTER VII. DISTRIBUTION
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
manufacturer.
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 Code;' 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-
lets.
A. Effect of Cigarette price 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. Post Code Conditions; 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
CHAPTER VIII. THE STATUS 0? THE CONSUMER
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.
CHAPTER IX. THE DEPENDENCE OP THE SOUTH ATLANTIC STATES
ON TOBACCO AND COTTON IN AC-BICULTIHE AMD MANUFACTURE
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
9347
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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.
CHAPTER X. THE N. R. A. A1\TD THE TOBACCO INDUSTRY
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.
/
9347
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WHOLBSALE (ZBAI3ES
Table of Contents
CHAPTER I. INTRODUCTION
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
CHAPTER II. TEE CODIFICATION OF TJHOLSSALING CONCERNS
I. The Extent of This Industry
Af 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
9347
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CHAPTER III- . FEDERAL JURISDICTION OVER THESE TRADES
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
i
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
CHAPTER IV. THE GENERAL WHOLESALE CODE
I. Extent of its Jurisdiction
A* Trades Encompassed
B. Number and Location of Establishments
C. Capital Invested
D. Sales of the Trades
9347
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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
CHAPTER V. IAB0R IN THESE TRADES
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
Agreement
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
9347
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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
CHAPTER VI. CLASSIFICATION OP TRADE PRACTICE ISSUES
CHAPTER VII. ISSUES PERTAINING- TO CHANNELS OF DISTRIBUTION
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-
ices
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. "Selective11 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
9347
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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
CHAPTER VIII. PROBLEMS OF COMPETITIVE PRACTICE
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
lf 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
9347
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CHAPIEB IX. BROAD EFFECTS OF CODIFICATION
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
9347
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WHOLESALE TRADES
Preliminary Summary of Findings
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. In 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.
9347
. -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
inequalities.
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.
9347
-195-
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
followed.
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 earners1 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 warehou.se 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
-196-
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
fringe1'-, 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.
9347
WOMEN'S CLOTHING- INDUSTRY
PART I. FINANCIAL PROBLEMS OF THE WOMEN'S APPAREL INDUSTRY
Table of Contents
CHAPTER I. GENERAL BACKGROUND
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
CHAPTER II. PROBLEMS INCIDENT TO THE INDUSTRY
I. Mortality
Ac Average Business Life.
B« tr Lure Dtatistics
C. 0 . 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 rJh 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
9347
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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
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TOMSIT'S . CLOTHING- INDUSTRY
Part I. Financial Problems of the Women's Apparel Industry
Preliminary Summary of Findings
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-
tractors1 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 latter1 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.
9347
-300- •
Terms of purchase and sale remain substantially as under the coo.es.
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.
Administration
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 show.net 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
-201-
supervision over the machinery for the enforcement of lav- and order.
Whether the law he of Industry1 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
employer1 s efficiently administered capital. In support of such a pro-
gram the Tfomen*s Apparel Industry would register an overwhelming vote.
9347
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WOMSUS CLOTHirS INDUSTRY
PART II. THE CONTRACT SYSTEM
Table Of Contents
CHAPTER I. INSCRIPTION Of THE CONTRACT METHOD OP PRODUCTION
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.
CHAPTER II. HISTORY OP THE DEVELOPMENT OP THE CONTRACT SYSTEM
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
Supervision.
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.
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XII. Negotiations of 1923-1924.
A. Threatened Stoppage by American Association.
B. First Proposal for Limitation of Contract.ors.
XIII. Appointment of Governor 5s 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. Johnson1 s Assurance of Giving Effect to Commission* s
Determinations,
9347
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,
CHAPTER III. ORIGINS, BASIC INFLUENCES, AND SOURCES OF PROBLEMS
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,
CHAPTER IV. MEASUREMENT OF THE EXTENT OF THE CONTRACT SYSTEM AND ITS
PROBLEM FACTORS.
I . Fragmentary Nature of Data,
II. Number of Shops, Number of Workers, Classified by Type of Estab-
lishment, 1900-1931, All Women1 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,
»
9347
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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.
CHAPTHR V. HE^UIAu?I0:T OF COKTHACTOR-JOBBER RELATIONSHIPS
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.
9347
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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.
Legality.
Limitation Unnecessary.
7. Large Contractors Suffer under Limitation.
G-. Mortality cannot be 31amed on Auction System.
15.
D.
S.
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.
9347
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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,,
'•':/, CHAPTER VI. CONCLUSIONS
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. ... ...
^£.7
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WOMENS CLOTHING INDUSTRY
PART II. THE CONTRACT SYSTEM
Preliminary Summary of Findings
CHAPTER I, HISTORY OP THE DEVELOPLHilftT OP THE SYSTEM
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
elements.
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
adopted.
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-
troversy.
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
■<d09~
,ot
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-
cies*
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
Industry.
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-
dustry,
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.
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■ • .. ■ .,
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WOMENS CLOTHING INDUSTRY
• • FART III.. OVERLAPPING- BETWEEN THE DRESS AND THE COTTON GARMENT CODES
.'••'. Table of Contents
CHAPTER I. FOREWORD
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
60 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
CHAPTER II. CHRONOLOGY OF ACTION TAKEN UNDER NRA
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
9347
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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
CHAPTER III. DIGEST OF EVIDENCE, TESTIMONY, AND OPINIONS
•ON THE DISTINCTIONS BETWEEN THE TITO "INDUSTRIES".
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. - $1.50Each or Higher
II. Materials Used
A. General, - "Regular" Dresses mostly Silk, House Dre.sses mostly
Cotton, Linen, and Cheaper Synthetic Fabrics
B. Zone of Overlapping, - "Largely in Use of Cottons, Linens, and
Synthetics in "Regular" Dress High Price, High Style Lines
III. Methods of Production
A. General, - "Regular" Dresses by Unit Production or .Dressmaker
Method, (one operator doing all sewing). House Dress by Section
Method, (separate parts of garment sewn by different operators),
Normally Volume Production
9347
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B. Zone of Overlapping, *.; "Regular" Dresses made in Large Part by
Section Method. Statement that as High as 40$ of Dress Industry
Uses Section Method in part
IV. Degree of Skilled Labor Required
A. General, - Highest Skill for Unit Method, Lowest for Section
method
B. Zone of Overlapping, - Largely Determined "by Tr"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-
ments,
B. Zone of Overlapping, - often No Distinction in Stores' Depart-
ments.'
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-
tion
B. Zone of Overlapping, - some Union and Non-Union Concerns -in each
"Industry"
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
CHAPTER IV. CONCLUSIONS
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
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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
/
9347
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WOi.lENS CLOTHING INDUSTRY
PART III. OVERLAPPING BETWEEN THE DRESS AND THE COTTON GARMENT CODES
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
South.
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"
becar.se 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.
-215-
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.
-216-
WQLffiP'S CLOTHING IITDUSI£Y
PART IV - ThE DELEGATION OF POUER
I?T TEE COAT A:TE SUIT COL.;: INDUSTRY ' -
Table of Contents
CHAPTER I. THE ESTABLISHED AG31JCIES OF SSL3JU
GOVEHNMENT IN THE SOMEN1 S APPAREL IliDUSTEY
I. Tyoe of Organization, - Union and Trade Associations
II. Purposes, - Negotiation and Administration of Collective Agree-
ments
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
Organization
CHAPTER II. THE WORKING PAETiZERSEIP BE-
TT7FFH ERA AHD HIS ESTABLISHED AGENCIES
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
Authority
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-
zations
E. Implied Responsibility of ilEA for Acts of Subordinate Industry
Agents
9347
. -217-
CHAPTER III. THE CHARGES AGAINST THE COAT £11) SUIT CODE AUTHORITY
I* Charges of Discrimination, Partiality, Oppression from Members of
Industry
A* The Howard Report
II . Questions Raised by NRA on True Representation, Inequitable Restric-
tions on Membership , and Dual Responsibilities of Code Authority
Ofiicials
Am Attitude of the Legal Division
B* Attitude of the Deputy1 s Office
CHAPTER IV, APPPAISAL AND CONCLUSIONS
It Objectives, ERA and Agencies, Essentially Similar, but Approach
Different
II. Legalistic vs. Practical Attitudes on Alleged Monopoly and Discrim-
ination
III. The Charges Were Not Substantiated, nor was the 'Atmosphere Entirely
Cleared
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
9'347
-218- §-
I70MENfS CLOTHING- INDUSTRY
PART IV - THE DELEGATION OF POUER
I if THE COAT AND SUIT CODE INDUSTRY
Preliminary Summary of_ Findings
Established Agencies of Self-G-overnment 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- •
siders*
NRA and the Established 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*
Charges 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.
9347
'CtCt J
FOREIGN TRADE UNDER THE NATIONAL INDUSTRIAL
ESOOTOBY ACT
Table Of Contents
CHAPTER I. , OBJECTIVES, SOURCES OF INFORMATION AND
SICrNIFICANCE OF RESULTS
I. Outline of Objectives
II# Sources of Information-
Ill. Significance of Results •
CHAPTER II. DECLINE OF WORLD TRADE AND OF THE FOREIGN
TRADE OF THE UNITED STATES FROM 1927-1929 TO 1934
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 trade1' to Loss of Export Mar-
kets
CHAPTER III. CHANGES IN THE COMPETITIVE POSITION OF THE UNITED
STATES IN RELATION TO TEE PRINCIPAL TRADING COUNTRIES
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
CHAPTER IV. FOREIGN TRADE AND INDUSTRIAL RECOVERY
I. Progress toward industrial recovery in the principal trading
Countries
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
-221-
FOBEIG-IJ TRADE UITDSH THE 1JATIOML IITDUSTIIIAL
HECOVEllY AGT
Preliminary Summary of Findings
CHAPTER I« OBJECTIVES AITD SOURCES OP IiJFOmiATIOH
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 lawf , 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 coo.es which -specifically '-covered imports or importing, and others
which involved important import and export trade problems •
CHAPTER II. DECLINE OF "/OZLD TRADE AITD OF THE FOREIGN TRADE OF THE
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.
9347
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
country.
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
markets,
CHAPTER III* CHANGES I1T THE COMPETITIVE POSITION OP T^IS UNITED STATES
IH K3LA.TI0N TO THE PRINCIPAL TRADING COUNTRIES
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 world1 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, Ita.ly,
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
9347
— 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.
Germany1 s imports from the United States were 14 per cent of her total
imports in 1927-29, and 8 per cent in 1934.
CHAPTER IV. FOREIGN TRADE AND INDUSTRIAL RECOVERY
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 0 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
9347
-224-
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 manufactured ^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.
9347
IMPORTS AMD IMPORTING- UNDER THE ACT
■ Table of Contends
CHAPTER I. IMPORTANCE OF IMPORTS
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
CHAPTER II. COMPOSITION OF IMPORTS
I. Imports "by Commodity Groups -.
II • Principal Import Commodities
III. Foreign Control of Imports
CHAPTER III. STRUCTURE OE IMPORTING BUSINESS
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
-L
VI. Labor Aspects of the Importing Trades
VII. Organization of Importers in Trade Associations
CHAPTER IV. EXPERIENCE OE NBA IN DEALING WITH IMPORT PROBLEMS
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
Competition
A. Price Provisions
B. Trade Practice Provisions
III. In Conaection with Code Provisions for Eiling Complaints
under Section 3 (e)
9347
—226-
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
CHAPTER. V. IMPORTERS IN THE CODE SET-UP
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
jurisdiction
(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
9347
. . -.227-
IUPORTS AND IMPORTING- UNDER TEE ACT •
Preliminary Summary .of. Findings
CHAPTER I. IivIPORTANCE OF IMPORTS
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
goods.
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.
. CHAPTER II. COMPOSITION OF IMPORTS
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.
9347
CHAPTER III. STRUCTURE OF IMPORTING- BUSINESS
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
9347
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.
CHAPTER IV. EXPERIENCE OF NRA IN DEALING WITH IMPORT PROBLEMS
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 might.be 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),
9347
-230-
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.
CHAPTER V. .IMPORTERS IN THE CODE SET-UP
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 indus.tr 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.-'
9347
-231-
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 *
q.^47
FOREIGN TRADE ASPECTS OF CERTAIN MAJOR
, CODED INDUSTRIES ■■
. ■ PART I. FOREST PRODUCTS -'
■ ■ ' »
Table of Contents
CHAPTER ;i. DESCRIPTION OP THE INDUSTRY WITH RIFIRENCE TO
FOREIGN TRADE
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 • •
CHAPTER II. UNITED STATES FOREIGN TRADE IN LUMBER AOT SAW ''
TIMBER
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
CHAPTER III. UNITED STATES FOREIGN TRADE IN OTHER LUMBER PRODUCTS
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
CHAPTER IV. 'THE LUMBER CODE AND FOREIGN TRADE
I. Code Provisions Affecting Imoorts
A. History and Text of Provisions
B. Administration
i'347
-233-
II. Code Provisions Affecting Exports
A, History and Text of Provisions
,'iw/^'j. Admin-rs'tration-- ••' '•'- •-•-•••■-■ - • *•■■■ -*~« — -.-•,..- ,-.—
CHAPTER V. THE NEWSPRINT INDUSTRY AND FOREIGN TRADE
I. Changes in World Production and Distribution, 1929-1932
A, Foreign Countries
BP 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
i
Q
347
-234-
FOREIGN TRADE ASPECTS OF CERTAIN MAJOR CODED INDUSTRIES
PART I. FOREST PRODUCTS
Preliminary Summary of Findings
CHAPTER I. DESCRIPTION OF THE INDUSTRY WITH REFERENCE TO FOREIGN
TRADE-
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.
CHAPTER II. THE FOREIGN TRADE OF THE UNITED STATES IN LUMBER AND
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.
Softwoods
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,
-235-
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.
CHAPTER III. FOREIGN TRADE IN OTHER LUMBER PRODUCTS
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.
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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.
CHAPTER IV. THE LUMBER CODE AM FOREIGN TRADE
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.
CHAPTER V. THE NEWSPRINT INDUSTRY AND FOREIGN TRADE
Changes in World Production, 1929-1933
Prom 1329 to 1932, the world production of newsprint decreased 14.1
O r-7 A »ni
per cent, cnue 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
Canada.
' 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
industry.
United States 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
9347
-238-
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
9347
-239-
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.
9347
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FOREIGN TRADE ASPECTS OF CERTAIN
MAJOR CODED INDUSTRIES
PART II. COTTON TEXTILES
Table of Contents
CHAPTER I. POSITION OF THE UNITED STATES IN WORLD COTTON TEXTILE
TRADE
I. The Importance of Foreign Trade to the Industry
II. Trends in the Trade "by Geographical Grand Divisions
CHAPTER II. DESCRIPTION OF THE DOMESTIC INDUSTRY WITH
REFERENCE TO FOREIGN TRADE
I. Commodities Moving in Trade
II. Organization for Foreign Trade
III. Raw Materials
CHAPTER III. FACTORS IN FOREIGN COMPETITION
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
CHAPTER IV. THE FOREIGN TRADE BY PRINCIPAL ITEMS
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
9347
-24-1-
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
9347
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PC" EIGN TRADE ASPECTS OP CERTAIN MAJOR CODED INDUSTRIES
PART II. COTTON TEXTILES
preliminary Summary of Findings
CHAPTER I. POSITION OF THE UNITED STATES IN THE WORLD COTTON TEXTILE
TRADE
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.
CHAPTER II. DESCRIPTION OF THE DOMESTIC INDUSTRY WITH REFERENCE
TO FOREIGN TRACE
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.
-243-
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.
CHAPTER III. FACTORS IN FOREIGN COMPETITION
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.
CHAPTER IV. THE FOREIGN TRAH3 3Y PRINCIPAL ITEMS
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
tabulation:
Commodity
Percentage char
Lge for six months ending June
30 as
compare
id
with corresponding
•perio^I
'■
c
f
previous year
Q^ia
ntity
basis
1933
Value
1934
basis
1933
1934
1935
1^35
Cotton cloth (in- .
Imports
+14 ...
+13
. +49
+ 8
+41
-10
eluding)
Exports
- 8
.-34
-24
-16
+ 7
-25
Tire fabric
Imports
Negl i
gible imports
Exports
-63
+79
.. + 8
-51
+158
+ 0
Tapestries and other
Imports
Not
available
-33
+32
-10
Jacquard-figured
Exports
-11
+154
. +231
-19
+139
+154
upholstery cloths
Pile fabrics and
•
manufactures -
Velvets and velvet-
'Imports
-47
+80
+1142
-41
+10
+427
eens
Other pile" fabrics
Imports
Hot
available
-39
-29
-25
Pile fabrics,* plushes, Exports
velveteens, and
corduroys
•39
-5
+11
-36
+21 +20
Table damask and.
manufactures
Imports Not available
-16
+46 -14
Damasks
Fabrics sold by the
pound 1/
Exports ^66 -2
Exports -31 -21
1/ No corresponding import classification.
+10
-10
+36
+39
-52 +7 - 1
9347
-245-
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.
9347
-246-
FOREIGN TRADE ASPECTS OF CERTAIN
UAJCSR CODED INDUSTRIES
PART III, AUTOiuOTIVES
Ta"ble of Contents
CHAPTER I. HISTORY AND. GROWTH OF FOREIGN TRADE
It Early Developments
A* Rivalry with France
B. Mass Production
C. Index of Growth of Trade t
CHAPTER II. WORLD TRADE DURING THE DEPRESSION
I. National Self- Sufficiency and Artifical Trade Barriers
II*. Production in the United States and in Foreign Countries
CHAPTER III. SUMMAEY OF THE UNITED STATES FOREIGN TRADE
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
IV.
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
B.
C.
o
o Foreign Consumer Demand
D« Foreign Factories and Assembly Plants
CHAPTER IV. FOREIGN EXCHANGE
I. Rates and Controls "by Countries, 1929 - 1935
A» Effects on Foreign Purchasing Power
9347
~247~
FOREIGN TRADE ASPECTS OF CERTAIN MAJOR CODED INDUSTRIES
PART III, AUTOHOTIVES
preliminary Summary of Findings
CHAPTER I. HISTORY AND GROWTH OF FOREIGN TRADE
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.
CHAPTER II. WORLD TRADE DURING THE DEPRESSION
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 res1 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,
CHAPTER III. SUMI.ARY OF UNITED STATES FOREIGN TRADE
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.
9347
-248-
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.
9347
-249-
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.
CHAPTER IV. POREIG-N EXCHANGE
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.
9347
-250-
TKE ADMINISTRATION OE SECTION 3 (e) OF THE NATIONAL RECOVERY ACT .
Table Of Contents
CHAPTER I. CONDITIONS NECESSITATING A TARIEE SECTION IN THE ACT
I. Inadequacy of Existing Laws
II. Anticipated Economic Conditions Necessitating Import Restriction
CHAPTER II. ORGANIZATION AND PROCEDURE EOR HANDLING- 00UPMI3TS ■
UNDER SECTION 3 (e)
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
CHAPTER III. COMPLAINTS UNDER SECTION 3 (e)
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
o
347
-251-
CHAPTER IV. ANALYSIS OF THE COMPETITIVE POSITION 07 CODED INDUSTRIES
INVOLVED IN COMPLAINTS INVESTIGATED UNDER SECTION 3 (e)
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
9347
••253-
THE ADMINISTRATION OF SECTION 5 (e) OF THS NATIONA.L RECOVERY ACT.
P r e 1 im i nary Summary Of Findings
CHAPTER I. CONDITIONS NECESSITATING A TARIFF SECTION IN THS ACT
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.
CHAPTER II. ORGANIZATION AND PROCEDURE FOR HANDLING COMPLAINTS
UNDER SECTION 3 (e)
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.
9347
■ -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
complaints.
(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
data.
(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.
9347
-254-
CH&PTER III, COMPLAINTS U1TDER SECTION 3 (e)
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 them0
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
9347
-255-
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.
CHAPTER IV. ANALYSIS OF THE COMPETITIVE POSITION OP COPED INDUSTRIES
INVOLVED IN COMPLAINTS INVESTIGATED UNDER SECTION 3 (e)
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
0r 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 ranging 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:
-255-
Material costs: seventeen items, increased an average of 29 per cent;
and one item decreased 0.9 per cent.
Labor costs: 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. ,
Total 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.
(TO-
?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.
9347
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LEGAL ASPECTS OF FOREIGN TRADE REGULATION UNDER THE ACT
Ta"ble of Contents
CHAPTER I. BRIEF SUM11AHY OF LAWS AFFECTING FOREIGN TRADE
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 La.ws
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
CHAPTER II. LEGAL PROBLEMS CONSIDERED BY THE CONGRESS IN FOR-
MULATING THE TARIFF SECTION (3 (e) OF THE ACT
I. Views Expressed at Committee Hearings and in Congressional Debates
Regarding the Adequacy of Existing Tariff Measures
CHAPTER III. LEGAL ANALYSIS OF SECTION 3 (e)
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
2m The Power to Impose Fees not for Revenue
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CHAPTER IV. CODS REGULATION OF FOREIGN TRADE UNDER SECTION 3 (a)
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'
Bf 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
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LEGAL ASPECTS OF FOREIGN TRADE REGULATION
~ UNDER THE ACT
Preliminary Summary of Findings
CH4PTEE I. BRIEF SUMHARY OF LAV/S ABKSCMNG FOREIGN TRADE
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.
CHAPTER II. LEGAL PROBLEMS CONSIEEKED BY CONGRESS IN FORLIULATING
SECTION 3 (e) OP THE ACT
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-
ed:
1. The President should be given authority to embargo imports
(as in the 31ack-Connery 30-hour week bill), in order to preserve the
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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.
CHAPTER III. LEGAL ANALYSIS OF SECTION 3 (e)
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 competitive with domestic
industry as contrasted with like or similar articles, 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 wore being 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
necessary.
•
Two Constitutional questions are presented in Section 3 (e) which
might have ^een decided adversely even had the Supreme Court, sustained
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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 opinion, and if this is so, the Section contains a. delega-
tion of legislative authority and is unconstitutional.
The second 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.
CHAPTSP. IV. CODS BEGULATIOH OP FOHEIGN TRADE UHDER SECTION 3 (a)
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 limits 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 commerce11 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
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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.
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