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Jones & Laughlin Steel Corp.—Cost of Wage Stabilization Board package after
Jan. 1, 1953
1. A general wage increase of 179 cents per hour.
third shift, an increase of 2 cents and 3 cents, respectively
attached) 7. Six paid holidays. For any work performed on any of those 6 holidays,
employes would receive 2 times the straight-time wage rate. The present contract provides 6 holidays at time and one-hali pay for only those
employes who work (note B attached). 9. Vacation allowances to be increased:
1 Including additional cost of existing overtime premiums, pensions, social security, and vacation provisions,
NOTES TO EXHIBIT 3
NOTE A-Cost of PREMIUM PAY FOR SUNDAY WORK The 4.3 cents for employes represented by USA-CIO was determined by increasing the existing payroll for Sunday work as follows:
Sunday Payroll for 12 Mos. Ending 9-30-51
Total Annual Increase
For Hours Paid For At
For Overtime Hours Paid at Time & 2
Payroll cost was (to
nearest $1,000). To be time and one
quarter (1%). Annual increase
No increase (already at 142 time).
(1) Dividing $1,870,000 by 52.1 million hours per year gives 3.59 cents per hour. (2) Increasing 3.59 cents per hour by 10.6 percent for the effect of increased wage rates by benefits under
demands 1 and 4 gives 3.97 cents per hour. (3) The incidental cost effect of social security, pensions, and vacations increases the 3.97 cents by 7.33 percent, giving 4.26 cents: Call 4.3 cents.
Note B-Cost of PAID HOLIDAYS
$2, 164, 596 Add for those who work holidays, 14,534 employes by 6 days by $14.12
1, 231, 320 Total annual cost.
3,395, 916 Present cost of 6 holidays per year: 14,534 employes by 6 days by $21.18.
1, 846, 98: Additional cost per year (or the difference)
1, 548, 935 (1) Dividing $1,548,935 by 52.1 million hours per year gives 2.97 cents per hour. (2) Increasing 2.97 cents per hour by 10.6 percent for the effect of increased wage rates by benefits under
demands 1 and 4 gives 3.28 cents. (3) The inci dental cost effect of social security and pensions increases the 3.28 cents by 3,5 persent giving
3.39 cents. Call 3.4 cents.
Senator FULBRIGHT. What they asked for, you considered would cost you 54 cents an hour; is that correct?
Mr. ELLIOTT. Yes.
Mr. ELLIOTT. We made no monetary offer to them as such and for very good reason.
Senator FULBRIGHT. Why not?
Mr. ELLIOTT. When you are bargaining collectively, you do not give away your ace in the hole in the form of money until you get some of the things that you want. There were in this case something over 100 issues, many of which were important to the management in its operation of the plants. We attempted to get somewhere on those, but there was no opportunity to do that. We could not arrive at any meeting of the minds on those points.
Senator FULBRIGHT. My time is up and I will reserve further questions until later.
Senator CAPEHART. Your questions are very good. Do you have more?
Senator FULBRIGHT. I will return to those questions later.
Senator CAPEHART. You said time and a half for Saturday and double time for Sunday would cost 271/2 cents an hour?
Mr. ELLIOTT. Yes.
Mr. Elliott. Yes, Senator, we work 7 days a week and three turns per day on many of our operations.
Senator CAPEHART. Do you work on the basis of shifts of 5 days a week each? That is, does the man work 5 days?
Mr. ELLIOTT. We are crewed so that each man works five 8-hour days normally a week.
Senator CAPEHART. Do the same men work every Sunday?
Mr. ELLIOTT. Sunday, as such, and time and a half for Saturday, as such.
Senator CAPEHART. That would be the equivalent, then, of getting 7 days a week work, but paying for 8 days?
Mr. ELLIOTT. Yes, it would.
Senator CAPEHART. On Saturdays, it would be the equivalent of paying for an extra half day worked?
Mr. ELLIOTT. That is correct.
Senator CAPEH ART. What percentage of your men work on Sundays?
Mr. ELLIOTT. Senator, I will have to look that up. We calculated it on the basis of the hours.
Senator CAPEHART. I know it is very simple to calculate but they do not all work on Sundays. How many; perhaps 50 percent of the shift?
Mr. ELLIOTT. You have each man working 40 hours and you have enough crews to work 7 days so that you would probably have—well, I won't guess. I will look it up and put it in the record.
(The information requested follows:) Practically all of our wage earners work on Sunday. Not every Sunday of course. The use of "swing shifts” means that most of our men work some Sundays.
The continuous operations such as coke ovens, blast furnaces, open-hearth furnaces, and utilities such as steam plants, work three turns a day, 7 days a week. Finishing facilities generally are working 19 or 20 turns with the "off" turns used for maintenance. These “off” turns are usually scheduled on Sunday if possible. Consequently, our normal complement of men working on any given Sunday is about 45 percent of our regular force.
Senator CAPEHART. You are, of course, familiar with the formulas that the Wage Stabilization Board has established for increasing of wages, what they call automatically, like a cost-of-living increase.
Mr. ELLIOTT. Regulations 6 and 8?
How much would the steelworkers in your company have been entitled to in the way of an increase under those two formulas?
Mr. ELLIOTT. At the time of the negotiations in December my recollection is that it would have been 5.9 cents per hour, and as of the time of the Wage Stabilization Board's award my recollection is that it would have been approximately 7 cents per hour.
Senator CAPEHART. What price increases have you officially requested from the Office of Price Stabilization?
Mr. ELLIOTT. I would like to say in my position of negotiation that I was not involved in the price negotiations.
Senator CAPEHART. What price increase have you actually, officially, asked for?
Mr. MOREELL. We have not asked for any, Senator.
Senator CAPEHART. What price increases are you entitled to, if any, under the so-called Capehart amendment?
Mr. MOREELL. We have been informed now that we are entitled to approximately $2.84 a ton across the board, which would be divided up as a percentage, as I understand it, among the various products.
Senator CAPEHART. Now, how many different categories of steel do you sell! I mean what prices? For example, you do not sell all your steel at the same price?
Mr. MOREELL. Several hundred, Senator.
Senator CAPEHART. Would you say it varied from $90 to $1,000 on special steel?
Mr. MOREELL. We do not make the special steels.
Senator CAPEHART. What is your lowest price per ton and your highest, if you can remember?
Mr. MOREELL. I would say from about $80 to $180.
Is it your understanding that the offer Mr. Arnall made under the Capehart amendment, approximately $3 a ton, that that is to apply to the low-price steel as well as the $180 steel?
Mr. MOREELL. They proposed to work it out on a percentage basis, Senator. I think it is $2.6 percent.
Senator CAPEHART. Did you furnish them the figures for working that out?
Mr. MOREELL. Yes, sir. Well, we had furnished figures before but not in connection with this recent determination.
Senator CAPEHART. You have had those figures before?
Mr. MOREELL. Yes. Senator FULBRIGHT. Your time is up and you may come back. Mr. MOREELL. Mr. Stephens is going to cover all the labor aspects of this situation and I would like to suggest that the matters having to do with the labor rates and the cost of the various demands are going to covered in detail by Mr. Stephens.
Senator FULBRIGHT. We would like the material requested of Mr. Elliott as well as Mr. Stephens.
Mr. MOREELL. All right.
Mr. STEPHENS. I have a statement, gentlemen, and the statements I have heard so far encompass the answers of a great many questions. It might be well for me to make my statement now and you could question us later.
Senator FULBRIGHT. Do you have any questions, Senator Sparkman?
Senator SPARKMAN. I have a great many questions I would like to ask.
Admiral, I read your statement and listened to the part that you read yesterday, with a great deal of interest. One thing I would like to ask you about was relating to your objection to the standard that had been laid down, the Eric Johnston formula. That was in the letter you addressed to Mr. Putnam. Mr. ELLIOTT. Yes, sir.
Senator SPARKMAN. In 1942, when the Emergency Price Control Act for World War II was passed, we used the same language that we used in the Defense Production Act of 1950, about the general fair and equitable treatment.
OPÀ under that act likewise went to the excess profits tax to work out its formula as to the three best base years, from 1936 to 1939.
Now the Emergency Court of Appeals passed on several issues that arose out of that. In other words, it became more or less tested.
Then in 1950, in adopting the Defense Production Act, we went back and used the same thing, and the OPS again went to the excess profits tax to adopt its standard: If that is something we have used and followed the same procedure, why is that not just about as good an arrangement as you can work out?
Before you answer, let me add this second question, too: If you do complain about them, do you not think instead of directing your complaint to OPS it should be directed to Congress? I think you would agree that OPS has probably done the natural thing in following the precedents established during the Second World War. This committee, apparently, decided that that was a pretty good thing because we adopted the exact language.
Mr. MOREELL. In answering your first question I will say this, Senator, that the excess profits tax is calculated after accelerated amortization.
The purpose of the excess profits tax is just exactly what its name implies; namely, to determine what the tax will be.
The purpose of the Eric Johnston earnings standard formula is to control profits. It is obviously not to control prices. But again I come back to the fact that in calculating the excess profits tax, the taxes calculated after accelerated amortization is included as a cost of doing business.
Now with respect to your second question, I would like very much to enter into the record a telegram which I sent to the chairman of this committee. I did exactly what you suggested, Senator. I sent this telegram to Senator Maybank, on March 7, and it is very short and I would like to read it. I said:
I regret that because of the meeting of your committee today I was unable to personally present to you my views on the current wage-price dispute in the steel industry. It appears from statements made by certain Government officials that they believe that the wage issues between the steelworkers union and the companies can and should be settled without consideration of the abilities of the steel companies to carry the increased wage costs. I have stated my position to the wage panel, to Mr. Feinsinger, and to other Government officials that the propriety of any wage increase regardless of amount must be considered in the light of the ability of the companies to pay the increase without impairing their financial stability or incurring the risk of bankruptcy.
On February 19, last, the Office of Price Stabilization released a statement entitled, “Application of OPS Industry Earnings Standard," which indicated that the so-called Eric Johnston standard for industry earnings issued in April 1951 would be adhered to by the present administration of OPS.
I maintain that the standard therein defined is unfair and impractical and constitutes a breach of good faith by the Federal Government.
The standard adopts as the base period for computing earnings the 4 years, 1946–49. This is a period when the steel industry had not yet begun to emerge from the depressed earnings status which had been forced on the industry by Government controls during the war period.
Furthermore, the standard uses for its computations a nonexistent entity which Mr. Johnston called profits before taxes.
There is no such thing. Profits are not profits until all of the costs have been deducted from income. Unfortunately, taxes are one of the major costs of doing business today. It is just as logical to speak of profits before taxes as it would be to speak of profits before wages, or profits before any other cost of doing business.
In addition, Mr. Johnston excludes from permissible costs all charges for accelerated amortization of plant facilities. This, I believe, to be a breach of good faith by the Federal Government. The Congress, by the Revenue Act of 1950, established the policy of granting certificates of necessity for accelerated amortization of plant facilities. The purpose as I understand it was to encourage the investment of private capital for plant expansions for the national defense, thus relieving the Federal Treasury of these financial burdens. Our company accepted this action in good faith and upon receiving certificates of necessity for certain major facilities, we borrowed large sums of money to finance one of the largest expansions in the steel industry. Our total construction program will cost in excess of $400 million. If now the Federal Government proceeds to welch on its commitments by employing devious and ambiguous formulas such as that embodied in the Johnston standard referred to above, I believe it is pertinent to ask whether any commitment of the Government can henceforth be relied upon. Wage costs and price structures in the steel industry are tied together as firmly as were the Siamese twins. Any attempt to cut them apart, even by the most skillful and well-intentioned surgery would be fatal to both. That is, we would have neither wages nor prices left and the solid core of the American economy would be destroyed.
I hereby submit my earnest plea that your committee take action to prevent the emasculation of the steel industry which is the basic industry of America and which has served our Nation well and faithfully in war and in peace.
I did exactly what you recommended, Senator. I brought my problem to the Congress.
Senator SPARKMAN. You say that the steel industry during that base period had not fully emerged from the depressed conditions of earlier controls.
Mr. Arnall testifying before us said that those 3 years—1947, 1948, and 1949—were the best 3 years the steel industry had had since 1918, if I recall his testimony correctly.
Mr. MOREELL. I do not have the figures back to 1918 for the steel industry, but the best year Jones & Laughlin ever had was in 1950 and I believe that year is the best year for the industry.