has generally improved the efficiency of industry and improved its capacity to produce better goods at lower prices than vice versa.

One of the benefits of legislation of this type which prevents substandard conditions is that it develops better paid employees but it also develops more efficient employees, more efficient contractors, more stable labor relations and, as a consequence, the ultimate good is served and that is when we have the benefit of economies rather than increases in operation.

I think both of these bills are overdue and I strongly recommend that they receive favorable consideration by the Congress. (Secretary Goldberg's statement follows:)

STATEMENT OF ARTHUR J. GOLDBERG, SECRETARY OF LABOR

I welcome this opportunity to urge enactment of legislation to improve wage and hour standards on Federal and federally assisted work.

I am particularly pleased that these hearings are being held by this subcommittee. You have shown a consistent and commendable awareness of the need to improve our Federal labor standards laws. It is not surprising, therefore, that you have scheduled the first hearings in several years on proposals to amend the Davis-Bacon Act and the 8-hour laws.

I want to assure the distinguished chairman and the other members of the subcommittee that you have the whole hearted support of the administration in this endeavor. In fact, I have been authorized to advise you that enactment of bills along the lines of those you are considering would be in accord with the legislative program of the President.

H.R. 9656 would modernize the prevailing wage concept in the Davis-Bacon Act, the basic law protecting the wages of laborers and mechanics employed on Federal or federally assisted construction work. It could do this by including certain fringe benefit payments within the term "wages" as used in the act. H.R. 9657 would repeal the confusing and overlapping series of laws dating back to 1892 and commonly referred to as the 8-hour laws. It would then provide a single uniform statute establishing daily and weekly overtime standards for employees covered by its provisions.

Both are necessary if the sound principle of public policy that Federal funds should not be used to depress prevailing local wage standards on Federal and federally assisted work is to continue to have real meaning.

The impact of Federal activity and Federal financing is particularly strong in the construction industry. This industry is one of our largest industries, with broad and sweeping economic implications.

The numerous and diverse construction activities of the Federal Government itself range from protecting our cities and towns against floods to ensuring our national defense and pursuing our exploration in outer space. The Federal Government also renders financial and technical assistance in many other areas which involve State and local programs. These include, for example, the construction of airports and highways to improve our transportation network; and the building of community and housing facilities to improve the living conditions of our citizens.

Almost from the inception of these varied Federal activties, Congress recognized the need for providing certain basic protections to laborers and mechanics employed on the construction work. The first 8-hour law, prescribing a standard 8-hour day for employees of Government contractors and subcontractors, was passed in 1892. The Davis-Bacon Act-requiring the payment of prevailing wages to laborers and mechanics on Government construction work-became law in 1931.

The 8-hour laws have been amended on various occasions between 1892 and 1940 in a series of rather hodge-podge measures which I shall discuss in more detail later. Substantively, the Davis-Bacon Act is the same today as it was in 1935. In other words, there have been no improvements in either of these laws since President Roosevelt's administraiton.

I know that the members of this subcommittee are fully aware that both the extent and the variety of Federal construction activity has increased immensely since 1940. Latest annual figures from the Bureau of the Census show the value of direct Federal construction "put in place" for the calendar year 1961 to be almost $4 billion. The figures for grant-in-aid type federally assisted construction was about $21⁄2 billion.

I do not believe that it can be fairly disputed that wage customs and wage practices have also undergone significant changes.

One of the most striking examples of the change which has occurred in wage customs and practices is in the area of welfare and pension plans.

Private welfare and pension funds to provide group life insurance, group hospitalization, disability benefits, and medical care and pensions for large groups of employees were virtually unknown in 1931 when the Davis-Bacon Act was enacted. They received their great impetus following World War II. The rapid growth of welfare and pension plans was recognized by the Congress when it enacted legislation in 1958-which this Congress is improving and strengthening to require the reporting and disclosure of these plans. The report of the hearings conducted by this subcommittee on the amendments to the Welfare and Pension Plans Disclosure Act points up both the evolution and the status of these plans in our present-day economy.

"The growth of private employee welfare and pension benefit plans has been one of the most significant developments of the last 15 years. While arrangements of various kinds designed to provide benefits in the event of sickness, accident, and death, and at the time of retirement, had existed prior to World War II, the real impetus to the establishment of these plans came from economic and social factors arising out of the war itself.

These included

"(1) the Government tax structure which made it possible to deduct contributions and thus significantly minimize their cost;

"(2) wage stabilization programs under which 'fringe' benefits could be granted in lieu of wage increases; and

"(3) the inclusion of welfare and pension matters in collective bargaining. "Figures relating to pension plans show that their number grew from 7,400, in 1945, to an estimated 25,000 in 1960, while the number of persons covered moved from 5.6 million to approximately 80 million.

"Tabulations introduced into the record of the subcommittee hearings show that in 1959 the assets of both welfare and pension plans amount to over $50 billion; and that they were growing at a rate of from $4 to $5 billion a year" (H. Rept. No. 998, 87th Cong., 1st sess., pp. 3-4).

The Department's Bureau of Labor Statistics made a recent survey of employer insurance, pension, and vacation payments for selected building trades in 100 cities. The insurance payments covered by the survey include life insurance, hospitalization, and other types of health and welfare benefits. These payments range from 35 cents an hour for plasterers in New York to 5 cents an hour for the same trade in New Orleans. In most other cities where they have been negotiated the payments range from 10 to 20 cents an hour. Insurance payments for bricklayers in Philadelphia are 17 cents an hour. In Baltimore the payments are 5 cents an hour. Payments for plumbers in Madison, Wis., are 20 cents an hour; in Duluth, Minn., they are 10 cents an hour.

This survey also included insurance, pension, and vacation benefits which have been negotiated by carpenters, electricians, painters, and building laborers unions. I am submitting for the record a chart summarizing this survey. The chart is attached to my statement. I believe that the report of the committee

and the survey of the Department clearly show the extent to which welfare and pension plans have grown and become an integral part of our industrial society.

I believe it is equally clear that they represent a firmly established wage custom and practice. In fact, they have been sanctioned by the courts under decisions holding they are bargainable issues within the congressional mandate of the National Labor Relations Act. The act requires both parties to bargain collectively and in good faith on "wages, hours, and other terms and conditions of employment." It follows that legislation to protect prevailing wage conditions cannot be effective unless it includes them. Otherwise, the evils which Congress sought to overcome when it passed the Davis-Bacon Act may again become commonplace.

Prior to the enactment of the act in 1931, there was no Federal statute which required the payment of prevailing wage rates to workers on Federal construction projects. With the advent of large Federal construction programs, however, it soon became apparent that local wage standards in a community had to be protected from cheap labor imported from other areas. Qualified contractors residing and doing business in an area of high wage standards found it impossible to underbid outside contractors who based their estimates for labor upon the low wages they could pay to workmen obtained from another locality or even another State. On many occasions the local contractors and local laborers had to stand by while outside contractors and outside labor performed under locally substandard conditions, work that otherwise would have been theirs.

To prevent these abuses on direct Federal construction programs, Congress enacted the Davis-Bacon Act. As amended in 1935, it requires the payment to laborers and mechanics of not less than the wages found by the Secretary of Labor to be "prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the city, town, village, or other civil subdivision of the State *** in which the work is to be performed."

As the various grant and loan and guarantee programs developed, Davis-Bacon wage standards were applied so that public money would not be spent in a manner that depressed the prevailing local wage structure.

This policy protects the workers in a locality. It also protects employers in in the construction industry against the unfair competition of employers who would secure construction contracts by submitting low bids in the expectation that they will be able to cut labor costs by paying lower wages than those generally prevailing in an area, even if they had to import workers from other

areas.

The principle underlying the prevailing wage concept has remained just as valid in the years since the Davis-Bacon Act was passed as it was some 30 years ago. Congress has recognized this fact by applying prevailing wage provisions to various federally assisted programs. In a sense, these programs represent an extension in the method of financing construction projects since 1931; i.e., indirectly through Federal assistance to State and local authorities as well as through direct Federal participation.

There was no definition of the term "wages" in the original Davis-Bacon Act, nor has the term since been defined. Because of the act's further requirement that wages be paid "unconditionally" the Department of Labor has not interpreted the term as including fringe benefits, unless the employees have a vested right in them. Only those fringe benefits unconditionally paid, such as vacation allowances, have been considered wages.

Yet it is generally recognized that fringe benefits have become a significant and important part of the wage structure in the construction industry. Regardless of the form which these benefits take, the employer's payments to the funds which provide the benefits are a form of compensation to his employees. It has become increasingly apparent that if the Davis-Bacon Act is to continue

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to accomplish its purpose, prevailing wage determinations issued pursuant to the act must, where appropriate, include these payments.

In order to achieve this result I commend to the subcommittee a bill (H.R. 9656) introduced by its chairman. H.R. 9656 would expand the terms "wages" in the act to include, not only the hourly rate of pay, but also payments by employers for fringe benefits customarily provided for employees by funds established under collective bargaining agreements.

I urge that prompt and favorable consideration be given to enactment of H.R. 9656. I do not believe that any administrative problems created for the department by this bill would be substantial, since the cents per hour paid for each worker would normally be ascertainable.

I am just as concerned that Congress enact H.R. 9657, the bill known as the Work Hours Act, which would modernize and clarify the 8-hour laws. These laws, which govern hours of work and overtime pay of laborers and mechanics employed on public work by the Federal Government and its contractors and subcontractors were enacted at different times between 1892 and 1940.

Workers, employers, and Government officials have struggled with this confusing series of statutes for several decades. The overlapping and ambiguous provisions of these laws have frustrated overtime protection for workers on Government construction. These ambiguities alone more than justify revision of these laws.

I would not attempt and time does not permit me to go into all these ambiguous and inadequate provisions. I would like to discuss a few of the more flagrant ones, however.

The present 8-hour laws permit the employment of workers on Government contracts up to 56 hours a week (7 8-hour days) without overtime compensation. Under the laws, no overtime protection, either daily or weekly, is provided for virtually all of the vast federally assisted construction programs. This is so even though the Federal share of the construction cost may be as great as 90 percent. Where the Fair Labor Standards Act does not apply, there are no restrictions whatever on the number of hours that may be worked by employees at straight time pay, except in the few instances where the particular law authorizing the program contains overtime provisions.

The recent amendments to the Fair Labor Standards Act, of course, extended minimum wage and-beginning September 3, 1963-overtime protection to employees on most construction work, if the enterprise in which they are employed does an annual busines of at least $350,000. This bill would extend overtime protection to additional workers employed on the large number of Federal and federally assisted construction programs where prevailing wage standards apply.

The operation of vital programs in Federal agencies can be severely hindered by a provision in the present 8-hour laws which is totally unrealistic. I am referring to the provision prohibiting laborers and mechanics employed by the Federal Government from working more than 8 hours a day "except in cases of extraordinary emergency."

In addition, the uncoordinated manner in which they were enacted, has resulted in much frustration of the purpose of the 8-hour laws-to provide standards for hours of work and overtime pay of laborers and mechanics employed on public work by the Federal Government and its contractors and subcontractors.

Some of the laws enacted, e.g., the 1892 law and its 1913 amendment are criminal statutes. Others are civil, such as the act of June 19, 1912. This act provides that every contract to which the United States is a party, involving the employment of laborers or mechanics, shall contain a provision that these workers shall not be required or permitted to work more than 8 hours a day. It imposes a civil penalty of $5 per day for each employee employed in violation of this provision and authorizes withholding of these amounts under the contract.

Many workers are covered by both the criminal and civil provisions. Some, however, are subject to the criminal statute only and others only to the statute providing the daily monetary penalty. For example, certain types of dredging work would be subject only to the criminal statute, while laborers and mechanics employed under certain service contracts would be covered only by the statute containing civil penalties.

Confusion and inequities also result from a number of conflicting and ambiguous exception provisions contained in the present laws. Some of the exceptions taking particular work out of the laws' coverage are canceled out by exceptions to the exceptions which put it back in again.

Another statute, the act of September 9, 1940, has the effect of relieving contractors and subcontractors of the Federal Government who come within the civil statute from the daily overtime prohibition if they pay time and one-half overtime compensation for all work over 8 hours a day. However, it is by no means certain that workers not paid overtime may secure payment either directly from the employer or from funds withheld for unpaid wages from the contractor under contract provisions. Existing case law on this point is split. The Comptroller General has ruled that, in the absence of statutory authority, he may not release to the laborers and mechanics found underpaid funds withheld under standard Government contract provisions for wages. Thus, although the 1912 act as amended by the 1940 act penalizes contractors for overtime work without overtime compensation, it affords at best an ineffective remedy to workers.

H.R. 9657 would repeal these confusing and overlapping statutes. It would substitute a uniform standard of an 8-hour day and a 40-hour week with time and one-half for overtime for all Government contracts requiring the employment of laborers and mechanics. In addition, it would correct the other shortcomings which I have mentioned.

The overtime standards would also apply to contracts financed or insured in whole or in part by Federal funds under any statute providing wage standards for the work. At the time the 8-hour laws were enacted their application to work contracted out directly by the Federal Government covered substantially all the work for which Federal funds were expended. This is no longer so. Many nonFederal agencies now do the actual contracting for work that is financed in whole or in part with Federal funds or with the aid of Federal guarantees, but which is nevertheless subject to Federal supervision or participation in details of spending the funds, and to Federal provisions for payment of predetermined prevailing or minimum wages.

By providing weekly as well as daily overtime protection to contractors' employees, H.R. 9657 would correct one of the most glaring deficiencies in the present law. Congress has established a straight-time workweek of 40 hours for Federal employment, for work connected with interstate commerce under the Fair Labor Standards Act, and for work on Federal supply contracts under the Walsh-Healey Act. Many responsible contractors who perform Government contract work covered by the 8-hour laws have adopted this 40-hour standard. Those who have not should be required to do so.

The administration believes these modernizations and improvemeents in the Federal 8-hour laws are long overdue. These statutes had their genesis in a law enacted in the Civil War period. The act of June 25, 1868 (R.S. 3738), provided that: "Eight hours shall constitute a day's work for all laborers, workmen, and mechanics who may be employed by or on behalf of the Government of the United States."

At a time when the average workday in private employment was about 10 hours, this statute represented a real step forward on the part of the Federal Government in its employment policies. Great progress has, of course, been made since that time in providing Federal labor standards protection-in private employment as well as on Government contracts.

In the area of construction work, however, I think there has been an unfortunate delay in adjusting labor standards laws to prevailing customs and practices. I think that this situation can be remedied to a great extent by congressional approval of bills similar to those now before this subcommittee. On behalf of the administration, I urge favorable action on this type of legislation in order that we can overcome the labor standards deficiency in this important activity of our Government.

I compliment this subcommittee for beginning the task of providing this urgently needed legislation. I pledge the full cooperation of the Department of Labor to help the subcommittee in any way we can.