United States. Temporary National Economic Committ.

Investigation of concentration of economic power; monograph no. 1[-43] (Volume no. 14) online

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76 S nil^f^ 88 } SENATE COMMITTEE PRINT
od Session I



INVESTIGATION OF CONCENTRATION
OF ECONOMIC POWER



TEMPORABY NATIONAL ECONOMIC
COMMITTEE



A STUDY MADE UNDER THE AUSPICES OF THE BUREAU
OF LABOR STATISTICS FOR THE TEMPORARY NATIONAL
ECONOMIC COMMITTEE, SEVENTY-SIXTH CONGRESS,
THIRD SESSION, PURSUANT TO PUBLIC RESOLUTION NO.
113 (SEVENTY-FIFTH CONGRESS), AUTHORIZING AND
DIRECTING A SELECT COMMITTEE TO MAKE A FULL AND
COMPLETE STUDY AND INVESTIGATION WITH RESPECT
TO THE CONCENTRATION OF ECONOMIC POWER IN, AND
FINANCIAL CONTROL OVER, PRODUCTION AND
DISTRIBUTION OF GOODS AND SERVICES



MONOGRAPH No. 14
HOURLY EARNINGS OF EMPLOYEES
IN LARGE AND SMALL ENTERPRISES



Printed for the use of the
Temporary National Economic Committee




UNITED STATES

GOVERNMENT PRINTING Jl 'ICE

WASHINGTON : 194



TEMPORARY NATIONAL ECONOMIC COMMITTEE

(Created pursuant to Public Res. 113, 75th Cong.)

JOSEPH C. O'M \HONEY, Senator from Wyoming, Chairman

HATTON W. SI Ml ^RS, Representative from Texas, Vice Chairman

WI yLLxM H. KINO, Senator from Utah

WALLACE H. WHITE, Jr., Senator from Maine

CLYDE WILLIAMS, Representative from Missouri

B. CARROLL REECE, Representative from Tennessee

THUsRMAN W. ARNOLD, Assistant Attorney General

•WENDELL BEROE, Special Assistant to the Attorney General

Representing the Department of Justice

JEROME N. FRANK, Chairman

•SUMNER T. PIKE, Commissioner

Representing the Securities and Exchange Commission

GARLAND S FERGUSON, Commissioner

•EWB. L. DAVIS, Chairman

Representing the Federal Trade Commission

1SADOR LUBIN, Commissioner of Labor Statistics

•A. FORD HINRlCHS Ghief Economist, Bureau of Labor Statistics

Representing the Department of Labor

JOSEPH J. O'CONNELL, Jn., Special Assistant to the General Counsel

•CHARLES L. KADES, Special Assistant to the General Counsel

Representing the Department of the Treasury



Representing the Department of Commerce
• * •

LEON HENDERSON, Economic Coordinator
DEWEY ANDERSON, Executive Secretary
THEODORE J. KREPS, Economic Adviser



•Alternates



Monograph No. 14

HOURLY EARNINGS OF EMPLOYEES IN LARGE AND SMALL
ENTERPRISES

JACOB PERLMAN



ACKNOWLEDGMENT

This monograph was written by
JACOB PERLMAN

Chief, Division of Wage and Hour Statistics, Bureau oj Labor Statistics

The Temporary National Economic Committee is greatly indebted
to the author for .this contribution to the literature of the subject
under review.

The status of the materials in this volume is precisely the same as that of
other carefully prepared testimony when given by individual witnesses; it is
information submitted for Committee deliberation. No matter what the
official capacity of the witness or author may be, the publication of his
testimony, report, or monograph by the Committee in no way signifies nor
implies assent to, or approval of, any of the facts, opinions or recommenda-
tions, nor acceptance thereof in whole or in part by the members of the
Temporary National Economic Committee, individually or collectively.
Sole and undivided responsibility for every statement in such testimony y
reports, or monographs rests entirely upon the respective authors.

(Signed) * Joseph C. O'Mahoney,
Chairman, Temporary National Economic Committee.

m



TABLE OF CONTENTS



Par*

Letter of transmittal - ix

Summary xi

CHAPTER I

Variations in the Wage Structure in General 1

Introduction 1

What is the wage structure. .". 2

Measurement of earnings 3

Industry approach to the wage structure 4

Earnings and methods of wage payment 5

Geographical differences 6

Variations by size of community , 7

Differences between union and nonunion plants 8

The occupational wage structure. _- 9

CHAPTER II

Variations in Earnings by Size of Company • 11

Extent of differences in hourly earnings by slvs-of company 12

Relation of geographical location to variations in hourly earnings by

size of company . _ 12

Relation of size of community to differences in hourly earnings by

size of company ' 15

Relation of composition of labor force to variations in hourly earnings

by size of company 16

Relation of product to differences in hourly earnings by size of com-
pany . 19

Unionization in relation to variations in hourly earnings by size of

company T . 20

Other differences by size of company 21

Differences in hourly earnings by size of company in the iron and

steel industry 22

General characteristics of industries in which hourly earnings vary

by size of company 23

Industries in which hourly earnings did not vary by size of company. . 25

CHAPTER III

Variations in Wages by Size of Establishment 27

Special field studies of industries, showing relationship of average

hourly earnings and size of establishment..-. 28

Industry-wide statistics on average hourly earnings by size of estab-
lishment , 35

Average hourly earnings in factories reporting to the Bureau of

Labor Statistics, by size, August 1937 35

Establishment reports to the census of manufactures 42

National Industrial Conference Board study 46

APPENDIX A

The Radio Manufacturing Industry 47

Description of the industry 47

Radio sets branch . ._ 47

Radio parts and radio tubes ' 54

v



VI TABLE OF CONTENTS

appendix B Page

The Explosives Industry.. ._ 57

Description of the industry . 57

Differences in average hourly earnings by size of company 58

Other differences by size of company 60

appendix c

The Soap Industry , — 61

Description of the industry. . 61

Differences in average hourly earnings by size of company 62

Differences in weekly earnings and overtime rates between large and

other companies 67

APPENDIX D

The Meat-Packing Industry . ,. 69

Description of the industry ±- 69

Differences in average hourly earnings by size of company " 69

Other differences by size of company 72

APPENDIX E

The Fertilizer Industry 75

Description of the inMstry _ 75

Differences in average hourly earnings by size of company _ 76

APPENDIX F

Cyclical Stability of Employment in Large and Small Companies in 10

Industries 81

Index - 87



LIST OF TABLES



CHAPTER II



Pag«

1. Average hourly earnings of workers in meat-packing industry, by

wage district, type of company, sex, and skill, December 1937 13

2. Average hourly earnings of workers in fertilizer industry, by region,

size of community, and size of company, during spring months of

1938 14

3. Average hourly earnings of workers in meat-packing industry, in

northern wage district, by size of community and type of company,
December 1937 _-_• ;___*. 15

4. Average hourly earnings in selected industries, by size of company,

sex, and skill ". 17

5. Average hourly earnings of selected occupations in radio sets and soap

industries, by size of company 18

6. Average hourly earnings of workers in fertilizer industry by region,

type of plant, and size of company, during spring months of 1938.-. 20

7. Number of plants paying extra rates for overtime work in selected

industries, by size of company 21

8. Degree of concentration in selected industries in 1935 24

CHAPTER III

9. Distribution of individual plants in wood household branch of furniture

industry, by average hourly earnings and size of plant, October 1937- 29

10. Distribution of individual plants in metal office furniture branch of

furniture industry, by average hourly earnings and size of plant,
October 1937 30

11. Distribution of individual plants according to average hourly earnings

in full-fashioned hosiery branch of hosiery industry, by region, size

of plant, and unionization, 1938 : 31

12. Distribution of individual plants according to average hourly earnings

in boot and shoe industry, by size of company, 1939*. 32

13. Average hourly earnings in bituminous coal industry, by size of

establishment, 1936 .. 33

14. Average hourly earnings in manufacturing industries reporting to the

Bureau of Labor Statistics, by size of establishment, August 1937.. 36

15. Average hourly earnings in durable and nondurable goods industries,

by size of establishment, August 1937 . 39

16. Average hourly earnings in 13 selected industries, -by size of establish-

ment, August 1937 .' 41

17. Average hourly earnings in manufacturing industries, by size of estab-

lishment, 1937^. 1 ... 43

Section A. Industries in which average hourly earnings did not

increase with size of establishment .. 43

Section B. Industries in which average hourly earnings increased

with size of establishment -44

APPENDIX A

18. Average hourly earnings of workers in sets branch of radio manufac-

turing industry, by sex, skill, and size of company, August 1937.. 48

19. Percentage distribution of all workers in sets branch of radio manu-

facturing industry according to average hourly earnings, by type

of company and skill, August 1937 . '__ 49

20. Percentage distribution of all workers in sets branch of radio manu-

facturing industry by size of company, sex, and skill, August 1937.. 50

VII



VIII LIST OF TABLES



Pag*



21. Average hourly earnings of all workers in sets branch of radio manu-

facturing industry, by skill, occupation, sex, and size of company,
August 1937 50

22. Percentage distribution of male workers in sets branch of radio manu-

facturing industry according to average hourly earnings, by size of
company and skill, August 1937 ' 53

23. Percentage distribution of female workers in sets branch of radio

manufacturing industry according to average hourly earnings, by

size of company and skill, August 1937 54

APPENDIX B

24. Distribution of plants in explosives industry according to average

hourly earnings, by type of plant, October 1937 58

25. Percentage distribution Of workers in explosives industry according to

average hourly earnings, by type of plant and skill, October 1937. 59
26.- Average hourly earnings in explosives industry by skill and size of

company, October 1937 60

27. Percentage distribution of workers in explosives Industry by skill and

size of company, October 1937 _'_ 60

appendix c

28. Average hourly earnings of workers in soap industry, by size of com-

pany, sex, and skill, January 1938 62

29. Distribution of plants in soap industry according to average hourly

earnings of all workers, by size of company, January 1938 63

30. Percentage distribution of workers in soap industry according to aver-

age hourly earnings, by size of company, January 1938,. -. 63

31. Percentage distribution of workers in soap industry, by se.x and skill

of workers and size of company, January 1 938 64

32. Average hourly earnings, weekly hours, and weekly earnings of workers

in soap industry, "by size of company, sex, skill, and occupation, Jan-
uary 1938 65

33. Percentage distribution of male workers in soap industry according to

average hourly earnings, by skill and size of company, January 1938. 66

34. Percentage distribution of female workers in soap industry according

to average hourly earnings, by skill and size of company, January

1938 . . 67

35. Percentage distribution of workers in soap industry according to weekly

earnings, by size of company, January 1 938 68

APPENDIX D

36. Average hourly earnings of workers in meat-packing industry, by wage

district, type of company, sex, and skill, December 1937 70

37. Percentage distribution of workers according to average hourly earn-

ings in meat-packing industry, by region and type of company,
December 1937 .. 70

38. Average hourly earnings of workers in meat-packing industry in

northern wage district, by size of community and type of company,
December 1937__ - '.. 71

39. Average weekly earnings of workers in meat-packing industry, by wage

district, size of company, sex, and skill, December 1937 73

APPENDIX E

40. Average hourly earnings of workers in fertilizer industry, by region,

type of plant, and size of company, during spring months of 1938- - 76

41. Average hourly earnings of workers in fertilizer industry, by region,

size of community, and size of company, during spring months of
1938. 77

42. Average hourly earnings in dry-mixing plants of fertilizer industry in

lower southern wage district, by size of company and size of com-
munity, during spring months of 1938 79



LIST OP TABLES IX

APPENDIX P

Page

43. Stability of employment in large and small concerns in 10 industries. 82

44. Relative stability of employment provided by large and small con-

cerns in 10 industries - 83

45. Stability of wage pavments in large and small concerns in 10 industries,

1929^37 , ...... .. 84

46. Relative stability of wage payments provided by large and small

concerns in 1 industries ..^ , 84

47. Average annual number of employees, 1929. ^ 86



LETTER OF TRANSMITTAL

August 15, 1940.
Hon. Joseph C. O'Mahoney,

Chairman, Temporary National Economic Committee;
United States Senate, Washington, D. C. .-

Sir: I have the honor to transmit this report on Hourly Earnings of
Employees in Large and Small Enterprises, prepared by the Bureau of
Labor Statistics for the Temporary National Economic Committee.
This study is illustrative, not comprehensive, but it indicates that in
many industries concentration of ownership in a few companies is
accompanied by higher hourly earnings for workers and suggests the
value of continuing studies along this general line.

The consequences of "bigness" in American industry to our economic
well-being have been approached from various angles by the Tem-
porary National Economic Committee. This volume analyzes the
importance of size to the earnings of workers. The basic comparisons
are between the average hourly earnings of employees of the largest
companies and those of the smaller companies in each of 16 industries
whose wage structures have been surveyed in detail by the Bureau of
Labor Statistics. It is clear, from this limited analysis, that workers
in the plants of big companies have higher earnings than those in
small companies, in industries in which concentration of ownership
centers control of a large share of the industry in a few companies.
Differentials in earnings do not appear clearly in industries in which
ownership is more diffused.'

Earnings differences between employees in establishments (or
plants) of different sizes are also discussed. A brief appendix sum-
marizes a limited inquiry into the comparative stability of employ-
ment provided by large and small companies, indicating no Clear
difference between the two groups in the same industry.

The wage structure of American industry is complex. Each indus-
try has its own pattern, in most cases an intricate one. Average
hourly earnings may differ in accordance with the region and the size
of the community in which they are located, the size of the company
which owns them, and the size of the plant itself. In some instances,
differences apparently attributable to one of these factors merely
reject the influence of the others. Thus, in many industries size of
establishment appears to be the basis for differences in average hourly
earnings, only to disappear when allowance is .made for levels of earn-
ings in the region and size of community in which the plants are
located. In other cases these differences are explained by the com-
position of the working force in each plant as between workers of
different skills, or sexes, or races; but generally the differences hold
good for workers of the same sex and race doing the same job.

Workers at the same job in the meat-packing, iron and steel, and
electrical-goods industries and in the manufacture of radio sets, explo-

XI



XII LETTER OF TRANSMITTAL

sives, soap, fertilizers, and chewing and smoking tobacco and snuff had
higher hourly earnings when employed by one of the biggest concerns
in their industry than when working for a smaller company. This
difference was not a function of region, size of community, or size of
establishment, and could not be explained by unionization.

On the other hand, there was no relation between the size of average
hourly earnings and the size of company in the shoe, leather, cotton
goods, woolen and worsted goods, hosiery, knitted underwear and
outerwear, radio parts and tubes, and furniture industries. Thus,
size of company appears to be a significant factor only in those indus-
tries in which a substantial share of the total business is done by a few
companies, not in the industries in which ownership is more widely
diffused.

' . In very few of these industries were there clear differences between
the average hourly earnings of employe in plants of different sizes.
An exception appears to be provided by bituminous coal mines.

This report has been written by Jacob Perlman, Chief of the
Division of Wage and Hour Statistics of the Bureau of Labor Sta-
tistics, with the assistance of Edwin M. Martin, of the Temporary
National Economic Committee Studies Section of the Bureau of
Labor Statistics, under the general direction of Aryness Joy. Mr.
Perlman has drawn largely upon materials assembled in his Division
over a period of years and has been assisted in this study by E. B.
Morris and other members of his staff. The data on average hourly
earnings by size of establishment in chapter III were compiled for this
report by Edwin M. Martin, Marshall Spaulding, Manuel Cambouri,
and Harry Brenner, of the Temporary National Economic Committee
Studies Section.

There follows for the convenience of the committee, a brief sum-
mary of the contents of this report.

Respectfully submitted.

Isador Lubin,
Commissioner of Labor Statistics.



SUMMARY

Considerable discussion lias been devoted in recent years to the role
played by large corporations in the economic life of the Nation. The
rapid progress of integration in industry, which has resulted in the
gradual elimination of small business in many industries, has received
wide attention. For the most part, however, this attention has been
directed toward the effect of concentration upon financial control and
upon price and market controls in relation to the functioning of the
economy. One important question has rarely been raised: Is the
growth of "big business" beneficial to workers, as measured by
earnings?

In order to answer this question, the Bureau of Labor Statistics has
undertaken this inquiry for the Temporary National Economic Com-
mittee, with particular regard to the earnings of workers in relation
to the size of the company and of the plant in which they are employed.
In the course of this inquiry, information available from previously
conducted studies of wages and hours has been assembled and ana-
lyzed. One important conclusion reached as a result of this analysis
is that hi some industries in which ownership is concentrated to a high
degree in a small group of large companies, higher earnings are gen-
erally found in the plants of the larger companies than in those of their
smaller competitors. In other industries in which ownership is more
diffused and no large companies dominate the field, there appears to
be no clear relationship between earnings and size of company or size
of establishment.

In 8 of the 16 different industries whose wage structures the Bureau
of Labor Statistics has analyzed hy size, earnings varied by size of
company, with differences m favor of the larger firms. These 8
industries include 3 of the largest employers of labor — meat
packing, iron and steel, and electrical goods, as well as those engaged
in the manufacture of radio sets, explosives,' soap, fertilizers, and
cigarettes and chewing and smoking tobacco. In each of these indus-
tries, there is a high degree of concentration in a few large companies.
A group of 8 other industries, in which there was no clear relation
between hourly earnings and size of enterprise, included shoes, leather,
radio parts and tubes, furniture, hosiery (full-fashioned and seam-
less), knitted underwear and outerwear, cotton eoods, and woolens
and worsteds. 1

In the eight industries in which the large companies hi general
showed higher earnings than smaller enterprises, it was rarely true
that the same level prevailed in all of the establishments of a corpora-
tion. Quite frequent y, a large company adapted its wage level to
local conditions, with higher hourly earnings in its northern than in its
southern plants and in large communities than in small towns. In
each industry, however, employees of the large concerns received con-

' A number of other industries have also been surveyed, but in most of them the number of establishments
or the number of workers covered was not large enough to permit a sufficient ly detailed classification of the
data to determine whether sizo of enterprise was an independent factor influencing the wage struoture, or
whether other factors were more important.

XIII



XIV SUMMARY

siderably higher hourly pay than those of the other group of small or
middle-sized companies in the same locality. >>

The reasons for these differences in favor of large companies are
beyond the scope of this report; to determine them would require a
much more detailed inquiry, with considerable emphasis upon finance,
location, technology, research, and engineering, which the Bureau
has not been equipped to undertake. However, it is quite often true
that higher rates of pay are justified by the executives of large com-
panies on the ground that they make it possible to obtain the best
employees in the labor market. This is more readily possible, of
course, in an industry where labor costs are a fairly low percentage of
total costs of production and have little effect on the margin of profit.
Said an executive of a large soap company: "The labor cost involved
in a cake q£ soap is- so small that we can afford to pay high wages and
command'fene best there is in the labor market." It is also sometimes
stated that higher rates are paid because of the desire on the part of
officials to maintain a good morale in the labor force. The relatively
high hourly earnings of employees of the large companies are often"
the result of piece work and production, bonus or incentive plans
which are designed to encourage efficiency among the workers and
thereby to reduce labor costs by sharing with them the savings result-
ing from greater output.

In addition to any conscious desire to pay higher wages, the ability
of the large companies to follow this policy must also be considered.
Good and efficient management was given by the president of a large
international union as the reason why workers in a certain corporation
were able to earn considerably more per hour than those in other
companies in the industry. Good management, however, is the
result of many factors. There are certain economies that can only
be achieved by placing numerous establishments under a single owner-
ship. These economies may emanate from the control or advanta-
geous purchase of raw materials, from the ability to maintain large
research organizations to improve technical processes and machines
and to replace old machines and production processes with new ones,
from the possibility of salvaging and manufacturing certain byproducts
(which in raw or semifinished form could be sold only at scrap prices) ,
from the reduction of the cost of distribution by large-scale advertising
and better utilization of sales organizations. Finally, there is also the
element of market control, which results from the advantages of con-
trolling patents on machines and processes, as well as the ability to
exercise a degree of control over prices which might otherwise force a
lower wage level.

In the course of this inquiry, the influence of size of establishment
as distinguished from size of company on the level of hourly earnings
was also analyzed to determine whether any possible economies of
operation and management associated with the size of the individual
operation, regardless of the size of the ownership unit, contribute to
higher earnings in large plants than in small ones. There is no clear
evidence that this is the case, with a few exceptions such as bitumi-
nous-coal mines. Available Nation-wide statistics on average hourly
earnings for groups of single plants of various size (regardless of owner-
ship) appeared at first to indicate.that there is a definite relationship.
•On more detailed analysis — by'' location, size of company, type of
product, and composition of labor force — for a few industries for


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