secure funds to expand its production would be able to tell prospective investors that on basis of the industry's average profits it expected to earn $18,000 after taxes, with the new facilities. It is impossible to believe that anyone would invest in a stock issue offering this return. WHY FURTHER AMENDMENTS TO TITLE IV OF THE ACT ARE NECESSARY Present price and wage controls bear unequally upon different segments of the national economy; by requiring manufacturers to absorb cost increases they destroy incentive. As such they fail to maintain and further the American system of competitive enterprise and the American way of life, and are contrary to the expressed intention and policies of Congress. Production goals in the year 1951 during which such controls were in or placed in effect were not achieved, and as a result time schedules of defense production had to be lengthened. According to the President's Council of Economic Advisers total corporate net income for 1951 after taxes was $18.1 billions or 20.6 percent less than for 1950. Ability to earn net income after taxes is necessary not only to attract capital required to finance further expansion of production facilities urgently needed for defense, but also to meet the greatly increased costs for replacement of worn-out plant similarly needed.* To the extent that such net income is reduced by unsound price controls, both replacement and expansion of facilities are curtailed. Price controls directly affect income before taxes, and the inevitable effect of unsound controls and the application of the Johnston and other profit standards in determining eligibility for price relief is to reduce corporate income subject to income tax and deprive the Government of the necessary revenues with which to pay its defense bills. According to the Council of Economic Advisers corporate profits before taxes decreased from annual rate of $50.3 billions in fourth quarter of 1950 to $42 billions in fourth quarter of 1951. It will do no good to increase the rate of taxation, if the profits are not there to be taxed. Nearly 14 months have elapsed since the imposition of price controls. Over this long period labor has more than caught up and goods have been produced, bought and sold at current price levels. The national economy has adjusted itself to such levels and become stabilized pricewise. As stated at the outset of this testimony, we have reached a point in the price and wage stabilization process where decontrol action should be taken at the earliest practicable date. We have therefore recommended that in the event the Defense Production Act is extended, such extension be for 1 year only and that Congress enact specific amendments to accomplish the following results: (a) To insure that there is a cessation of the use of the priorities and allocations authority at the earliest practicable date; any given commodity or product should be "decontrolled" as soon as possible, without having to wait for a time when it is possible to decontrol all commodities and products; (b) To insure that the same type of decontrol action is taken in the price and wage field, at the earliest practicable date; (c) To insure that price and wage control is used for the purpose Congress had in mind when it enacted the 1950 act and the 1951 amendments-instead of being used as a device for limiting profits and thus destroying incentive; (d) To insure that price and wage controls are so administered as to control both prices and wages-to the end that prices and costs are held down to the maximum practicable extent, but to the end, also, that cost increases are recognized as a justifiable basis for price increases in those cases where the Government does not succeed in "holding the line" on costs. (To accomplish this, title IV of the act could be amended so as to require that all price control regulations provide for the redetermination at the election of manufacturers of ceiling prices thereunder at 6 months intervals to take into account any increase in wage rates placed in effect since the last determination of such prices and increases in material costs resulting from such wage increases.) Replacement costs for productive facilities have risen over 100 percent in the past 10 years as indicated by increase in construction cost index of the Engineering News Record. NATIONAL COUNCIL OF SALESMEN'S ORGANIZATIONS, INC., Hon. BRENT SPENCE, Washington 25, D. C. DEAR SIR: The National Council of Salesmen's Organizations, Inc., representing the wholesale salesmen of America are keenly interested in amendments to the Defense Production Act of 1950 as amended, which would effect the following objectives: 1. Reimpose Federal rent controls on hotel accommodations. 2. Clarify section 401 of the act (title IV) specifically granting authority to the President to issue regulations prohibiting decreases as well as increases in wages and salaries under certain circumstances. We have had the privilege of appearing and testifying orally before the Senate Committee on Banking and Currency during its recent hearings and we would appreciate it if you could include in the record of the hearings to be conducted by your committee the enclosed statement which sets forth in full the reasons for our proposals. We would also request that a copy of our brief heretofore submitted to the Salary Stabilization Board in connection with the administration of salary controls applicable to salesmen also be made part of the record of your committee's hearings. We are well aware of your interest in the welfare of wholesale salesmen who represent such an important segment of our distributive economy. We are certain that you and your distinguished colleagues in the House Banking and Currency Committee will give every consideration to the proposals for amendments to the act. We wish to thank you and members of the House Banking and Currency Committee in advance for their consideration of our request for amendments. Yours very respectfully, Enclosure. LOUIS A. CAPALDO, President. STATEMENT PRESENTED ON BEHALF OF THE NATIONAL COUNCIL OF SALESMEN'S ORGANIZATIONS, INC., NEW YORK, N. Y. Chairman Spence and members of the Committee on Banking and Currency, of the House of Representatives, I respectfully submit this statement to your committee on behalf of "the wholesale salesmen" of America. We are the men who earn our livelihood by selling "at other than retail" the products of our Nation's factories, ranging from raw materials to final finished products. Recent surveys and studies indicate that there are well over a million wholesale salesmen in the United States today. We believe that we are an important key to the stabilization and maintenance of a sound national economy, for it is through the fruits of our labors that the goods of our factories are sold, the assembly lines of industry kept rolling, and through our efforts merchandise reaches the consumer public at competitive prices that counteract inflation. The National Council of Salesmen's Organizations, Inc., of which I have the privilege of being president, is a nonprofit membership corporation chartered under the laws of the State of New York, with its principal office at 80 West Fortieth Street in the city of New York. The council is the parent body and national voice of leading wholesale salesmen's associations and clubs in various industries and geographical areas constituting a representative cross section of American industrial life. We address your committee on behalf of the following organizations: Amigos of Syracuse, Inc. Associated Millinery Men Boot and Shoe Travelers Association Drug Salesmen's Association of Pennsylvania, Inc. Empire State Furniture Manufacturers' Representatives Fabric Salesmen's Association of Boston, Inc. Fabric Salesmen's Club of Chicago Food Products Salesmen's Association, Inc. Garment Salesmen's Guild Handbag Supply Salesmen's Association Infants' and Children's Wear Salesmen's Guild, Inc. Luggage and Leather Goods Salesmen's Association. Mid-Atlantic Commercial Travelers National Handbag and Accessories Salesmen's Association, Inc. New England Negligee and Lingerie Association New York Association of Hosiery Mill Salesmen New York Corset Club New York-Penn-Ohio Travelers Association, Inc. Philadelphia Textile Salesmen's Association Professional Sales Club of New York Dress Salesmen's Association Manufacturers' Representatives Associated Sporting Goods Sportswear Salesman's Association, Inc. Textile Veterans Association Rocky Mountain Trade Association The Far Western Travelers Association Underwear-Negligee Associates, Inc. Work Clothes and Sportswear Salesmen's Club The National Council of Salesmen's Organizations, Inc., desires to focus the attention of this committee on the fact that the defense mobilization program has placed the wholesale salesmen in an anomalous economic "squeeze." The salesman in many industries today is faced with an extreme economic crisis due to his having suffered abnormally high increases in the costs of selling with no compensating increase in earnings because of the decrease in the number of units sold. The present administration of governmental economic controls has given rise to many inequities as far as the wholesale salesmen of America are concerned. On the one hand, they are given little or no protection against the sharp and continuing rises in the cost of selling their merchandise, which they must absorb entirely out of their commission earnings, and, on the other hand, they are subject to the restrictions of Government controls on the rate of commissions which they may earn. Furthermore, the very same controls which limit their rate of commission affords them no protection against those few unscrupulous employers who, unfortunately, do exist and who, in times of shortages of civilian goods, profiteer at the expense of their salesmen by indiscriminately cutting the salesmen's earnings through various and devious employment practices which have no economic justification. It lies with the power of this Congress to make provision at this time in the Defense Production Act of 1950, as amended, for means of affording relief to the salesmen in at least two specific ways: (a) By providing the authority for the reimposition of Federal rent controls on the rates charged for transient hotel accommodations; (b) By either clarifying its intent as expressed in section 401 of the Defense Production Act of 1950, as amended (title IV), or if necessary by providing a new section specifically granting authority to the President to issue regulations prohibiting decreases as well as increases in wages and salarics under certain circumstances. Before proceeding to indicate to your committee the reasons why National Council strongly urges the course of action hereinbefore indicated, I believe that it is necessary that certain basic economic facts regarding the nature of our calling as wholesale salesmen should be brought forcefully to your attention. These facts are as follows: 1. We are wholesale salesmen, that is, we sell the goods and products of our employers to retailers and other distributors. The greatest percentage of wholesale salesmen are traveling men. 2. As outside salesmen we are the only employee group unconditionally exempt. from the minimum wage provisions of the Fair Labor Standards Act. 3. According to the most reliable statistics, approximately 70 percent of the million or more outside salesmen employed in the United States are on a straight commission basis, i. e., they earn their livelihood entirely from commissions on goods sold, do not receive any salary or expense allowance, and are required to pay their own traveling, hotel, showroom, food, railroad, entertainment, and other expenses of selling, out of their gross commissions. The Harvard Survey of Salesmen's Compensation indicates that the earnings of outside salesmen average about $5,400 per salesman, per annum, while travel and business expenses incurred in the course of their selling are approximately between $1,300 and $1,500 per year. National Council has compiled its own statistics from its member groups which include that the expenses of selling incurred by the average wholesale salesman runs from 33% percent to 40 percent of his gross commission earnings (salesmen who travel the South and far West advise us that their selling expenses have risen 50 percent since 1946-47). While it is true that the gross dollar sales of salesmen have increased due to the increase in the price of goods, the number of units sold by salesmen has decreased; it is expected that with the growing shortage of civilian goods there will be still further decreases in the number of units sold, so that to the average wholesale salesman there has been no compensating increase in net dollar earnings; on the contrary, his net dollar earnings have decreased. With the above must also be considered the relationship of the salesmen's net earnings to real buying dollars, that is, to the cost of living, When so considered the salesmen's true earnings have lagged far behind that of any employee group in the United States. Moreover, due to the nature of their position in the framework of business a few, if any, wholesale salesmen have received or can be expected to receive fringe benefits which other employees obtain. These then are the economic facts relating to the wholesale salesmen's position in the economic life of our country. In the light of these facts, the National Council of Salesmen's Organizations, Inc., urges that as a minimum your committee in its deliberations relating to proposed amendments to the Defense Production Act of 1950, as amended provide the authority for (a) reimposition of Federal rent control on transient hotel accommodations as a means of alleviating the continuing rise in the cost of selling which the salesmen of America are absorbing out of their reduced earnings; and (b) that specific authority be indicated in title IV of the act which will enable the Salary Stabilization Board to provide necessary safeguards in its regulation controlling salesmen's earnings, against indiscriminate and unjustifiable cuts in such earnings by some few unscrupulous and shortsighted emplovers. A. Reimposition of Federal rent controls on transient hotel accommodations: By the very nature of their calling and means of doing business the wholesale traveling salesmen are wholly dependent upon transient hotel accommodations for both living and business quarters in the pursuit of earning their livelihood. The problem affects not only wholesale salesmen but extends to a vast section of the traveling public who are equally dependent upon transient hotel accommodations in order to live and to carry on their normal business activities. Beyond this, we will attempt to show that these increased costs of doing business are inevitably passed along to the general public in higher prices for goods and commodities. We respectfully submit to this committee the following sampling, showing the sharp rise in rates for bedroom and sample room accommodations in key and middling cities from 1946-47 to the present time: 1 Bedrooms have risen from 50 percent to 75 percent since 1946-47. The Hotel New Yorker, New York, has within the past 2 months increased its sample room rates from $1 to $3 per day. The Benjamin Franklin Hotel, Philadelphia, Pa., has within the last month raised its sample room rates from $1 to $2 a day. NOTE.-With respect to both the Hotel New Yorker and Benjamin Franklin Hotel, it is noteworthy that the very same sample room when used as a transient bedroom is generally half-priced. It is the basic premise of the National Council that hotel rates for bedrooms and sample rooms have increased in the past 5 years out of all proportions to the increase in the cost of hotel operations. The figures we have just cited provide demonstrable proof of our contention. But beyond this we contend that the salesmen, not to mention the traveling public, are today the victims of gouging and questionable practices on the part of some hotel managements against which salesmen have no defense, the number of available and suitable hotels being limited, particularly in smaller and middle size cities, and even in the large cities, the number of centrally located suitable hotels are limited. (1) The following practice is so widespread that it can safely be said to be of common, Nation-wide usage. A salesman engages a "sample room" for the period of his stay in a city. For this he pays, as you will see from the above figures, a rate far in excess of what the hotel ordinarily receives for a transient accommodation. When he desires to have a cot to sleep on put in the room at night, he is then charged an additional rate ranging anywhere from $2 per night up to the full daily rates charged for regular accommodations by the hotel. (2) Some hotels, during market weeks, when a number of salesmen banded together into a "show group" reserve whole floors-and often as many as two to three floors to exhibit their lines, follow the practice of having one man register per room although as many as five or six men "occupy" the room, but each man is charged the full rate for occupancy so that income on this room, per diem, may run as high as $30. (3) Of almost Nation-wide use is the practice of informing guests, upon registration, that there are no single rooms available but that a "double" is ready for immediate occupancy at, of course, the double rate. A salesman, dubious of finding other accommodations either at the late hour he may be registering or under the pressure of a number of business appointments that he must keep during the day, is without choice and takes the double room at the increased rate to insure a place to sleep that night. The hotel industry is, and rightfully should be, privately owned. Nevertheless, the hotel serves the community in the capacity of a quasi-public-service institution. The segment of the public which is compelled to depend upon the accommodations provided by these hotels should have some protections against overcharging or overreaching practices being visited upon them either directly or indirectly, at a time when they have no other choice. The figures quoted in this statement present hard and concrete facts acquired through the direct experiences of our membership and submitted in reports to the National Council offices. They have not been derived through the medium of the survey or poll that can too easily be rigged to establish whatever points the surveyors or pollsters may wish to establish. The harm that is being done through these increases transcends in injury to the salesmen alone; for while we salesmen often have to absorb the expense ourselves, 97026-52-pt. 2--15 |