become effective on January 20th, 1942, as to less-carload shipments moving at first, second and third class rates, or multiples thereof, and on shipments of money, but suspended the tariff as to other shipments moving at commodity rates. Thereafter hearings were held, briefs were filed and oral argument was had before the Commission, and, on September 8th, 1942, the Commission handed down its opinion which I have just in

(Page 4631)

troduced as Exhibit No. 93, in which it approved the extension of the emergency charge to interstate commodity rated traffic, effective October 1st, 1942.

As to intrastate less-carload shipments moving at first, second and third class rates and multiples thereof, and on shipments of money, the 10 cents emergency charge became effective in most states on January 20th, 1942. As to commodity rated traffic, the 10 cents emergency charge became effective on intrastate traffic in 14 states on October 1st, 1942. Subsequently it became effective in other states, except four in which it has not yet become effective.

It is estimated that the Express-Domestic revenue for 1942 from the application of the 10 cents emergency charge amounted to between 13 and 14 million dollars. The purpose of the emergency charge was to meet the total cost of the shortened work-week for all express employees from 48 hours to 44 hours, wage increases for express employees allowed during 1941, particularly the increase of ten cents per hour resulting from the mediation settlement, all of which increases in payroll cost, were estimated to be some 16 million dollars per

(Page 4632)

year. The addition of the emergency charge of 10 cents per shipment was also to partly meet other increased costs of operation, principally the increased cost of material and supplies.

"Express Privileges", the fourth principal column on page 2—

BY MR. HARTUNG:

Q. Mr. Benson, may I interrupt you right there to ask whether or not the opinion of the Commission states the basis for the application, and gives reference to increased cost; and if so, where that can be found in the opinion.

A. Just a moment, please.

Q. That is page 341, covering the proposed emergency charge, is it not?

A. Yes, sir. On page 341 the necessity for the proposed emergency charge is covered very fully, and it states in part as follows:

"Since then"-that is, since 1939-"there have been further increases in the cost of labor and payroll taxes aggregating $16,425,588 annually.

(Page 4633)

"There will also be an additional estimated increase of $338,624.77 in the cost of principal commodities to be purchased in 1942, at prices higher than in 1939."

Now, I was saying that "Express Privileges", the fourth principal column on page 2, represent amounts paid to railroad companies and other carriers for services which they perform in transporting express traffic and for facilities which they provide incident thereto.

As previously explained, approximately 95 per cent of Express-Domestic revenue is earned on the lines of carriers which are parties to the standard operating agreement. For their services in transporting express matter and furnishing necessary facilities, such carriers receive as compensation whatever is left out of ExpressDomestic revenue and other income earned by the express company after the deduction of operating expenses, taxes and other charges incurred directly by the express company. Obviously then, changes in express revenue, pay of employees, other operating expenses and express taxes, directly affect the compensation paid to such carriers as "Express Privileges".

(Page 4634)

For 1929, payments to all carriers for express privileges aggregated $150,044,945. In 1933, such payments aggregated $46,004,318.

Q. You are reading now from the fourth column on page

A. 2.

Q. -page 2?

A. Yes, sir. The decrease in Express Privileges payments for 1933 compared with 1929 reflects not only the decrease in Express-Domestic revenue but also the lower rate of decrease in pay of employees, other operating expenses, and taxes.

(Page 4635)

The payments for express privileges increased from 1934 to 1941, but not proportionately to the increase in Express-Domestic revenue. That express privileges payments did not increase in proportion to the increase in revenue is evident from the average express privileges payment per shipment which shows an almost constant decline from 1929 to 1941. The average express privileges payment per shipment in 1929 amounted to 82.18 cents, whereas in 1941 it amounted to 36.56 cents.

Q. That is an extra fifth column?

A. Yes, sir. The increase in the express privileges payment per shipment from 36.56 cents in 1941 to 65.27 cents in 1942 resulted largely from the movement of less carload shipments of relatively greater weight and a substantial increase in carload shipments used in the war effort with relatively higher charges, and in part to the ten-cent emergency charge.

THE CHAIRMAN: May I interrupt you just at this point to ask you this question: Supposing that 50 carloads of the same commodity were shipped by express. Would that be considered as one shipment? THE WITNESS: Fifty carloads?

THE WITNESS: Fifty carloads, if from one shipper or one consignor to one consignee, would be considered as one shipment, yes, sir, but I do not remember ever having heard of a shipment of that kind.

THE CHAIRMAN: I see. Well, what were some of the extraordinary carload shipments that Mr. Head spoke about the other day here?

THE WITNESS: Those were single carload shipments.

THE CHAIRMAN: Just single carloads?

THE WITNESS: Yes.

THE CHAIRMAN: What did he say about steel?

THE WITNESS: Oh, by the way, Mr. Chairman-pardon me, I was incorrect about that. You asked me if 50 carload shipments could be considered as one shipment.

THE CHAIRMAN: Yes.

THE WITNESS: Now, as a matter of fact, they could not be, because of our tariff, which provides that each carload shipment shall be considered as a separate carload shipment, with minima, and with certain restrictions.

THE CHAIRMAN: Well, then, the total number of shipments, if shipped by single consignor to the same

(Page 4637)

consignee I will not say 50, but multiple carloads, shipped at one time from one consignor to the same consignee, that would not be one shipment?

THE WITNESS: No.

THE CHAIRMAN: But would be as many shipments as there were carloads; is that correct?

THE WITNESS: That is right, yes, sir. That is the way we take them into account. We have a separate waybill for each carload shipment.

MR. HARTUNG: Mr. Head spoke of 27 shipments of steel, as I recall it.

THE CHAIRMAN: Twenty-seven carloads.

MR. HARTUNG: Yes.

THE WITNESS: With $156,000 in revenue, I believe.

THE CHAIRMAN: Yes.

THE WITNESS: Or about $6,000 per car.

BY MR. HARTUNG:

Q. Continue.

A. Pay of Employees shown on this page is taken from reports to the Interstate Commerce Commission, excluding the salaries of general officers under I. C. C. reporting division No. 1. In 1929, pay of employees

(Page 4638)

aggregated $103,611,051, or 56.75 cents per shipment. In 1933, pay of employees aggregated $52,916,724, or 54.82 cents per shipment.

(Page 4639)

Because of the wage increases the nation-wide application of the 44-hour week to express employees, and because of increased employment, pay of employees in 1941 aggregated $99,090,767, or 57.41 cents per shipment. For the same reasons and because the wage increase of 10 cents an hour was applied throughout 1942, pay of employees in that year aggregated $116,001,660, equivalent to 70.29 cents per shipment.

Other Operating Expenses, in the fifth column, that is, operating expenses other than pay of employees, aggregated $38,581,370, or 21.13 cents per shipment in 1929. The Express Company reduced the average cost per shipment for other operating expenses from 21.13 cents in 1929, to 15.38 cents in 1941 and 17.24 cents in 1942, whereas pay of employees increased from 56.75 cents per shipment in 1929 to 70.29 cents per shipment in 1942.

As shown on this page, in the last column, express taxes in 1929 amounted to $1,779,726, averaging slightly less than 1 cent per shipment, and in 1942 amounted to $9,784,886, an average of 5.93 cents per shipment. The substantial increase in express taxes resulted from the inclusion in that account of taxes paid under the Carriers'

(Page 4640)

Taxing Act of 1927 (Railroad Retirement) and under the Railroad Unemployment Insurance Act. Such taxes represent added labor costs. If the approximately 7 million dollars of such taxes, averaging about 4-1/2 cents per shipment, were added to the payroll for 1942 which was $116,000,000, that item would amount to approximately 123 million dollars and the average per shipment for labor cost would be approximately 75 cents rather than 70.29 cents, contrasted with approximately 57 cents in 1929, an increase in labor cost of 18 cents per shipment, or 32 per cent.

Page 3 shows operating revenues and operating expenses, as well as index numbers, for the years 1923 to 1942, inclusive. In the last main column are shown the ratios of operating expenses to operating revenues. The amounts of Other Operating Expenses shown about the center of the page were ascertained by deducting Pay of Employees from Total Operating Expenses. Under each subdivision there are two index numbers, one using 1923 as a base to represent 100 and the other using 1929 as a base representing 100.

As to operating revenues: Using 1923, in which the operating revenues amounted to $321,153,918, as the base, or 100, we find during the years subsequent to 1923 that the low point, with an index of 39.05, was reached

(Page 4641)

for 1933. Since then there have been gradual increases, the year 1940 showing an index of 55.74. The index numbers for the years 1924 to 1929, while indicating a recession, reflect no great variation but for the succeeding four years show a very substantial recession and an improvement for the years 1934 to 1940, coincident with the somewhat improved business conditions. The index numbers for 1941 of 61.77, in the third column, and for 1942 of 81.90 reflect the handling of increased traffic due to the war effort.

THE CHAIRMAN: Those are per cents, not cents?

THE WITNESS: Those are per cents. I stand corrected.

(Page 4642)

Using 1929 as the base, or 100, the same trend is shown for the years 1930 to 1942, inclusive, in the fourth column, as was indicated for those years, using 1923 as the base.

As to Pay of Employees: Using 1923, during which the pay of employees amounted to $114,142,341, as the base, or 100, we find substantially the same constancy in the index numbers for the years 1924 to 1929, inclusive, as found for Operating Revenues. For 1929, using 1923 as the base, the index number for Operating Revenues was 91.86. For pay of Employees the index number was 90.77. For 1933 the index number for Operating Revenues was 39.05. For Pay of Employees the index number was 46.36. This disparity continued and increased. For the years 1934 to 1940, inclusive, there was an almost constant rise in the index numbers for Pay of Employees and in a greater degree than in the index numbers for Operating Revenues. In 1940 the index number for Operating Revenues was 55.74 and for Pay of Employees 75.81.

Because of the shorter work week and increases in pay, the index number of Pay of Employees for 1941 rose to 86.81 compared with an index number of 61.77 for Operating Revenues.

(Page 4643)

BY MR. HARTUNG:

Q. That is comparing the second last item in the middle column of pay of employees with the middle column under operating revenues?

A. Operating revenues; that is right.

Q. It is difficult to follow these index numbers. I don't know whether the Board has been able to do it or not.

A. For 1942, during which the increase of 10 cents per hour was in effect throughout the year, the index number of Pay of Employees rose to 101.63 compared with an index number for Operating Revenues of 81.90.

Using 1929 as the base, or 100, the exhibit shows the same trend during the years 1930 to 1942 as indicated by the exhibit using 1923 as the base. Using 1929 as the base, the index number of Pay of Employees for 1942 is 111.96 compared with the index number for Operating Revenues of 89.16. These index numbers will be found on the bottom line of the page.

As to Other Operating Expenses: During 1923, they aggregated $44,212,079. Using that year as the base, or 100, we find an almost constant recession in the index numbers for the years 1924 to 1933, inclusive, from

(Page 4644)

which point on there were variations in the index numbers but not material until 1941 and 1942, when, because of increased prices and other costs of operation, the index numbers for 1941 and 1942 were 60.04 and 64.34, respectively. Thus as to Other Operating Expenses, which the Express Company is better able to control, using 1923 as a base, the index number for 1942 was 64.34 compared with an index number for Pay of Employees of 101.63, and an index number for Operating Revenues of 81.90. Using 1929 as the base, or 100, the index number for Other Operating Expenses for 1942 is 73.73 compared with an index number for Pay of Employees of 111.96 and an index number for Operating Revenues of 89.16.

In the last three columns are shown the ratios of Pay of Employees, Other operating Expenses and Total Operating Expenses to Operating Revenues for each of the years from 1923 to 1942, inclusive. They show, for example, that for 1923, 35.54 per cent of the Operating Revenues were expended for Pay of Employees and 13.77 per cent of Operating Revenues were expended for Other Operating Expenses, a total for all Operating Expenses of 49.31 per cent. They show an almost constant increase in the ratio of Operating Revenues expended for pay of Employees with little change in the ratio for Other operating Expenses. In 1941, 49.95 per cent of the

(Page 4645)

Operating Revenues were expended for Pay of Employees compared with 35.54 per cent in 1923. In 1942, the ratio of Operating Revenues expended for Pay of Employees was 44.10 per cent and the ratio for Other Operating Expenses was reduced to 10.82 per cent.

(Page 4646)

The ratio of Pay of Employees to Operating Revenues decreased from 49.95 per cent in 1941 to 44.10 per cent in 1942. I have already testified to the substantial increase in revenue derived from the handling of carload traffic. In 1942 there was an increase of approximately $14,000,000 compared with 1941. I have indicated also that between $13,000,000 and $14,000,000 additional revenue resulted from the application of the ten-cent emergency charge. If these two items of additional revenue, aggregating nearly $28,000,000, were deducted from Operating Revenues for 1942 of $263,014,737, Operating Revenues would be approximately $235,000,000, which, when compared with Pay of Employees of $116,001,660, would produce a ratio of Pay of Employees to Operating Revenues of about 50 per cent, and this would be about the same as for 1941.

As I have related, there has been a substantial change in the character of traffic handled due to the war effort, resulting in a higher average weight per shipment. If the same character of traffic had been handled in 1942 as in 1941, the ratio of Pay of Employees to Operating Revenues would have been in excess of 50 per cent. The substantially higher revenue per shipment in 1942 which is not representative of our usual express

(Page 4647)

traffic in more recent years accounts for the lower ratio of pay of employees to Operating Revenues for that

year.

Page 4 shows for the years 1923 to 1942, inclusive, the total operating expenses of express companies, the figures having been taken from the annual reports to the Interstate Commerce Commission, the same source from which the figures on previous pages of this exhibit were taken.

The statement shows also the amount of pay of employees for the same years and the percentage which the pay of employees is of the Total Operating Expenses. It shows that for the year 1923, the Total Operating

Expenses aggregated $158,354,420, and the pay of employees aggregated $114,142,341, equivalent to 72.08 per cent of the Total Operating Expenses.

In 1942, Total Operating Expenses aggregated $144,447,820, and Pay of Employees aggregated $116,001,660, equivalent to 80.31 per cent of the Total Operating Expenses.

It will be observed that for the years 1923 to 1934, the percentage of Pay of Employees to Total Operating Expenses remained fairly constant, whereas since 1934, there has been a steady increase in the percentage. In

(Page 4648)

1942, the percentage was 80.31 per cent, compared with 72.08 per cent in 1923.

The statement shows also the total amount of Other Operating Expenses for the same years and the percentage which those Other Operating Expenses bear to the Total Operating Expenses.

It shows that in 1923, Other Operating Expenses amounted to $44,212,079, or 27.92 per cent of the Total Operating Expenses, whereas in 1942 Other Operating Expenses amounted to $28,446,160, or 19.69 per cent of the Total Operating Expenses.

Whereas percentages of Pay of Employees to Total Operating Expenses increased from 72.08 per cent to 80.31 per cent, the percentages of Other Operating Expenses decreased from 27.92 per cent to 19.69 per cent.

(Page 4649)

On page 5, there is shown in condensed form for each of the years 1929, 1933, 1940, 1941, and 1942, in line 1, the gross operating revenue, income, and profit and loss credits, representing all items of revenue, income and credits, and down below is shown the disposition thereof, separated as to Labor Costs, All Other Operating Costs, and Express Privileges Payments.

BY MR. HARTUNG:

Q. Those are contained in Items 2, 3, and 4; is that correct?

A. Right. It is substantially a showing of the disposition of the express dollar.

Labor costs are subdivided as between amounts paid for salaries and wages as recorded on payrolls, commissions which represent compensation paid agents on a commission basis, and railroad retirement and unemployment insurance taxes, which are incidental labor costs.

In this statement, as in previous ones where reference is made to payrolls or pay of employees, it pertains only to exclusive employees of the express companies paid on a salary basis.

As of December 31st, 1942, Railway Express Agency conducted express operations in 19,088 cities, towns

(Page 4650)

and villages, at 1,782 of which employees were paid salaries and wages. In 17,306 cities, towns and villages, agents of Railway Express Agency were compensated on a commission basis. In 15,670 of these 17,306 cities, towns and villages, the express agent, compensated for his express service on a commission basis, was also compensated by a railroad company for railroad service on a salary basis. The commission agents retain the compensation due them for express service by taking credit in their settlements to the Express Company. Commission agents are not paid through the medium of a payroll.

Q. Mr. Benson, you have just referred to the large number of agents who are paid in part by the railroad company, and in part by the Express Agency.

A. Yes.

Q. Are those commonly designated as joint agents?

A. Yes.

Q. And they are usually regular paid employees of the railroad company, who serve as agents for the Express Agency; is that correct?

Q. Now, there is one other item also. You have referred to the 19,000 towns and villages in which we have offices, in which Railway Express Agency has offices, but very often a larger number of offices is referred to. Will you please give the board the explanation for that?

A. Yes, sir. Railway Express Agency has approximately 23,000 offices. While we are only represented in 19,088 cities and towns, in the larger cities we have more than one office usually. In the city of New York, for