One week ago the American Federation of Labor, through its Executive Council meeting in Miami, Florida, reached an historic decision: to do battle against that current practice which undermines the stability of our economy and the security of our wage earners - the runaway shop. 1500 hat workers in South Norwalk, Connecticut, have been on strike for more than 6 months because their employer refuses to include in their contract a job security clause protecting the income of the workers should the company continue its transfer of operations elsewhere. Last year, despite the recurrent optimism voiced by many New England organizations, over 4,000 workers in one industry alone - the textile industry - lost their jobs due to the southward migration of textile mills from New England, New York and Pennsylvania. Last year, workers in a score of industries throughout the New England and Middle Atlantic states, and to a lesser extent other parts of the country, were told that they would be forced to take wage cuts in order to meet low wage competition from other areas, or else face the prospects of a move by their employers to such low wage areas.
The American Federation of Labor and other organizations who seek to do battle against this industry migration are doing what is only right and necessary. This is not an issue between North and South, nor between labor and management. Instead it is an issue that concerns the stability and integrity of our entire national economy. When I spoke in Chattanooga, Tennessee last December on this problem, I discussed as a prime example of the unfair competitive practices utilized in moving industry from one section of the country to another the issuance of tax-free municipal bonds, a practice I shall discuss with you shortly. That very week, the citizens of Knoxville, Tennessee discovered that their state law permitting this practice could be turned against them when a large mill in Knoxville was induced to abandon that location for a tax-free plant in a small Tennessee community. North Carolina has experienced an outmigration of hosiery mills to lower wage areas. Businessmen and labor officials in all parts of the country have indicated to me their concern over the problem of runaway plants which affect the prosperity of their community, the payrolls of their workers and the fairness of competition in all parts of the country.
It is only rare that an obvious example of a runaway plant presents itself. More often, the process is more subtle and indirect than a simultaneous liquidation of a New England plant and a transfer of these operations to southern plants. Instead, firms start by operating mills in both New England and the South, then tend to abandon their northern plants in periods of decline and later expand their southern operations when prosperity returns. This is true not only of movements from North to South, but movements within a region or even from this country to locations in Puerto Rico or elsewhere.
Of course, natural advantages have been responsible for a large share of this industrial migration. A larger supply of labor, primarily from the farms; nearness to raw materials and production factors; and greater space are among the many advantages which attract industries to the South or rural areas away from the cities of New England and the North. But you and I know that these are not the only reasons; and I am certain that the National Legislative Council of the American Federation of Labor is interested in those Federal policies which have a bearing upon this problem. Certainly we are justified in maintaining that the policies of the Federal Government should not contribute to the practice of runaway shops. Neither should they be so inadequate, in terms of standards or protection offered, that these serious abuses of fair competition, with all their consequences upon the national economy and interstate commerce, may prevail.
The list of Federal programs and policies which affect industrial dislocation is a staggering one. Federal power policies have enabled a manufacturer to move to Chattanooga where his annual electric bill is less than half of what it would be in Boston. The Fulbright Amendment to the Walsh-Healey Act permits southern cotton mills to pay outrageous low wages on Government contracts, far below the level paid by New England textile manufacturers. The newly announced policy on channeling defense contracts to distressed areas of substantial labor surplus, recently endorsed by President Eisenhower, does nothing to permit New England textile mills to gain an equal footing with the runaway shops and other southern plants in obtaining such contracts. The use of the capital gains tax as an incentive for liquidation, and the tax-exempt status of charitable organizations as a method of tax avoidance, have both been used by those engaged in moving industry to the low wage areas. The developing markets and industry in the South, which we should not oppose, have been due to a great extent to RFC loans, Federally constructed or financed power projects, soil conservation programs, farm price supports, grants-in-aid, construction projects, military installations, tax amortization certificates, and other policies and programs of the Federal government. Moreover, if we are to expand and diversify industry in our older areas in order to replace the traditional industries lost through migration, we must consider a program which might well include providing loans and assistance to small business, retraining unemployed industrial workers, providing tax amortization benefits for industries expanding in areas of chronic unemployment, developing natural resources, and aiding local industrial development agencies. We must provide more adequate security for the jobless and aged who are the victims of industrial dislocation. Equal consideration must be given to all areas in the administration of policies dealing with tax write-offs, transportation rates, and government contracts and projects; for these should not be factors inducing plant migration.
The average hourly wage paid most of the workers in your organizations are far in excess of $1.50 an hour; but because the Federal minimum wage is only half of that figure, an outdated 75¢ an hour, many industries migrating to rural communities of the South pay workers only that less than subsistence wage, and those employees under learner permits even less. The President has seen fit to make no recommendation upon increasing the minimum wage or expanding its coverage at this time. But current economic uncertainty, far from justifying a delay in taking this step, requires immediate action in order to bring a more realistic floor beneath the purchasing power of our workers. The old fears of unemployment, and price increases repeated by the President's message have been amply disproven by experience under the Fair Labor Standards Act and the most recent data on wage rates. I have previously mentioned the practice of building plants with tax-exempt municipal bonds as an inducement to runaway plants. Those of us, including your organization, who have pointed out the destructiveness of this practice to those who utilize it and those at whom it is aimed, were gratified by the decision of the House Ways and Means Committee to repeal the Federal tax exemption on the interest from such bonds; even this small step was modified so as to permit such bonds to remain tax free, and merely prevent the manufacturer who receives such plants from deducting the rent he may pay on them to the municipality. Such a provision is, of course, inadequate to meet this problem, particularly where a lease of the tax-free plant is not involved.
As many of you know, I discussed each of these items in some detail in a series of three speeches delivered to the Senate last May, wherein I set forth the problems of the older area and the area hit by industrial dislocation; and suggested some 40 proposals to help meet these problems. Time does not permit an examination of each of these this morning; but I would like to mention briefly one Federal policy which is of primary importance in this field, and which will be considered by the present session of Congress: The Taft-Hartley Law.
First, let us consider the effect of the Taft-Hartley Law upon the problem of runaway plants. I am frequently told that no one can demonstrate that the Taft-Hartley Law has in any way affected the organization of southern industry or the movement of industry from North to South. I am sure you would not agree with that conclusion. Statistics with respect to the unionization of our non-agricultural labor force, and with respect to the organizational attempts of individual unions in the South, indicate very clearly that the passage of the Taft-Hartley Law has frozen unionization to the disadvantage of New England and the cities of the North, and to the advantage of those employers who seek to avoid unions by moving South. The degree of unionization, as you well know, affects wages, fringe benefits, workloads, the cost of working and safety conditions, and managerial prerogatives. Thus a non-union plant is able to operate at a cost differential which threatens the competitive position of the employer and his workers in a unionized plant; and a non-union area offers this feature as an added inducement to industrial migration. Indeed, the National Labor Relations Board has recently held that employer statements which threatened plant migration if the workers supported a union was not a threat and therefore not in violation of the so-called "free speech section."
Many sections of the Taft-Hartley Act are of concern to us here, not only in general but also because of their effect upon industrial dislocation. The complete elimination of the closed shop, provisions for decertification of weak unions and the encouragement of empty and evasive collective bargaining have all made more difficult the organization of more newly industrialized areas. The sweeping ban on secondary boycotts requires garment workers to handle textiles from runaway or substandard plants, a defect not corrected by the President's minor recommendations on this point. The lengthy and tangled procedures and filing requirements of the Taft-Hartley Law have led to unnecessary delays and expenditures and in effect nullify the protection of the Act for weak unions in hostile atmospheres. The ban on participation of economic strikers in representation elections, which will be felt even more heavily during a time of surplus labor and unemployment, has already broken the union in those cases where strike breakers have replaced 51% or more of the strikers. Again, the recommendation of the President falls short in attempting to correct this abuse.
However, the two sections of the Taft-Hartley Law which have probably done more damage in this field than any others are those dealing with the pre-election and "free speech" rights of employers and employees; and those dealing with the priority and jurisdiction of state anti-labor laws. With respect, first of all, to the free speech section, many examples could be cited to show the effects upon labor union organization and elections of hostile speech which, under the Act, could not even be considered as evidence of an unfair labor practice. I know of no other field of law where a man's statements cannot be introduced as evidence to show his motives for performing a subsequent act, simply because such statements were worded in such a way as to refrain from directly making threats or promises. Moreover, the recent decisions of the NLRB in the Livingston Shirt and other cases indicate that a still wider latitude will be given to the immunity afforded such statements, regardless of their effect upon representation elections, and unions will not be permitted an equal chance to reply. The Smith Bill, which purports to represent the President's views on Taft-Hartley, seeks to write into the statue the application of this doctrine to representation elections. This is far different from the amendment which is needed, which would permit the use of such statements as evidence in the light of the context in which they were uttered and similarly prevent interference in representation elections by outside pressure groups who do not directly represent the employer but further his interests.
With respect to the issue of Federal-state jurisdiction, the Taft-Hartley Law again adopts a position which discourages union security and encourages industrial migration. Under section 14(b), state laws prohibiting the union shop or other union security agreement take precedence over the Taft-Hartley Act, which permits a modified form of union shop, as long as they are more restrictive than Taft-Hartley. These so-called right-to-work laws apply to all plants within the state where such laws are on the books, regardless of whether the plants are in interstate commerce and regardless of whether a union shop has been agreed upon by a national employer and union, each of whom has units in several states. At least 16 southern or agricultural states were encouraged by section 14(b) to adopt these more restrictive state laws. In states such as Massachusetts, on the other hand, union security provisions more liberal than Taft-Hartley are not permitted to prevail. Thus a company may avoid a union shop, and frequently as a result any union at all, by moving from Massachusetts to one of these 16 states.
Any doubt as to the effect upon industrial migration of this provision of the Taft-Hartley Law, and the state right-to-work laws which it engenders, was removed in my opinion by the message sent to the South Carolina Legislature on January 19th of this year by South Carolina's Governor James F. Byrnes. Permit me to quote from the text of that message:
"South Carolina is engaged in free but serious competition with other southern states to secure new industrial plants and the expansion of existing plants. The competition is keen. It will become keener in the days ahead of us. New plants will come here because we have an abundant supply of loyal and intelligent workers….In our effort to increase the number of industries and thereby increase the number of jobs for wage earners we have one handicap. Virginia, North Carolina, Georgia, Florida, Alabama, Texas, Tennessee, Arkansas, Arizona, Iowa, Nebraska, Nevada, North Dakota and South Dakota. Each has a "right-to-work statute". It declares the policy of the state is that no person shall be denied the right to work because he is a member of a union or because he is not a member of a union. But in South Carolina there is no right-to-work statute. Thus, South Carolina's natural advantage of willing and competent workers has been lessened by the recent enactment of right-to-work legislation in other southern states are actively engaged in having South Carolina manufacturers move plants to their states."
Certainly Governor Byrnes' statement is clear evidence of the inducements to runaway plants encouraged by the Taft-Hartley Law. Not only should section 14(b) be eliminated, but an amendment should be added making clear that Federal law in matters of union security and other rights protected by the Act should prevail in interstate commerce. Such an amendment, you may recall, was included in Senator Taft's Bill unanimously reported by the 82nd Congress' Senate Labor Committee with respect to union security in the building trade.
Unfortunately, the recommendation of the President was again in the opposite direction. Instead of asserting the superiority of Federal law in regard to this Federal problem, the Senate bill proposes to permit any state to take any action of any kind in any strike that it deems to be an emergency. This can mean compulsory arbitration, labor injunctions, imprisonment of strikers, and a number of other remedies which a state may choose to exercise if it decides to label a strike as an emergency. The enactment of the states' rights and free speech provisions of the Smith Bill, even if accompanied by all of the other minor improvements recommended by the President, would make the Taft-Hartley Law far worse than it is today, and accentuate the movement of plants from organized to unorganized areas. As pointed out by President Meany in his statement to our Committee a week ago, "The bill falls far short of the general overhauling of the Act which is necessary before it can be called fair to the workers of this country."
In view of the widespread interest which has recently been expressed in this problem of runaway plants, and the many serious questions it raises for our economy and its stability, particularly as a general economic decline gets under way, I suggest to you that the American Federation of Labor, together with the C.I.O. and other interested organizations, call a conference in Washington on the problem of industrial migration. Such a conference, with experts and leaders from all fields and all parts of the country, could perform a valuable service, not only by alerting the public and our Government officials to this problem, but also by examining public and private methods of preventing such migration from occurring, and of alleviating the problems which such migration creates. I submit this suggestion to you for your consideration; and I appreciate the opportunity to be with you today to discuss this matter.
The Taft-Hartley Law and Industrial Migration
1. The Taft-Hartley Law has frozen unionization. The degree of unionization affects wages, fringe benefits, workloads, the cost of working and safety conditions, and managerial prerogatives.
2. Harmful provisions of Taft-Hartley: In general.
a. The complete elimination of the closed shop, provision for decertification of weak unions, and the encouragement of empty and evasive collective bargaining, have all made more difficult the organization of more newly industrialized areas.
b. The sweeping ban on secondary boycotts requires, e.g., garment workers to handle textiles from runaway or substandard plants.
c. Unnecessary delays and expenditures.
d. The ban on economic strikers voting.
3. Harmful provisions of Taft-Hartley: In particular.
a. Free speech.
-hostile statements cannot be considered in their context as evidence of an employer's motive in committing a subsequent act.
-Smith bill seeks to incorporate Livingston Shirt decision and extend "free speech" to representation elections.
-Amendment which is needed: permit the use of such statements as evidence in the light of the context in which they were uttered, and similarly prevent outside pressures.
b. Federal-State jurisdiction.
-Under Section 14(b), state laws prohibiting the union shop or other union security agreement take precedence over the Taft-Hartley Act, which permits a modified form of union shop, as long as they are more restrictive than Taft-Hartley, regardless of whether a union shop has been agreed upon by a national employer and union (at least 16 states).
-Message of Gov. Byrnes (See attached statement)
-Amendment needed: (Like Senator Taft's Building Trade Bill of 1952)
-Smith Bill: worse on emergencies - injunctions, compulsory arbitration, imprisonment of strikers, etc.
CONCLUSION: Recommend a Washington conference.
Speech Images