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actual cost to the carriers of the new scale and duration of benefits will be negligible. With the incentive of the requirement that unemployed senior railway workers must be given the added protection proposed in the pending bills, the carriers will have every reason to cooperate with the Railroad Retirement Board in relocating the older experienced men now being ruthlessly ejected from the industry.

Against these costs, which may be kept very low if the carriers modernize and humanize their employment policy, must be set the fact that the industry has rarely been in so healthy a condition financially as it is today. Most of the comparisons offered by the carriers to the committee upon this subject place the 1955 and 1956 figures against the 1929 operating results. It is true that 1929 was a boom year, during which American railroads compressed costs—especially wages and realized extremely high net profits. It is equally true that the financial practices of these carriers and American industry generally during 1929 and the immediately preceding years found their natural result in the great depression.

But, even by comparison with 1929, current operating results of the railways show up very favorably. The carriers have given to the committee data on their working capital, claiming it to be a significant measure of their financial difficulties. The best measure of current or liquid condition of the carriers is the ratio of their current assets to current liabilities. That ratio, in 1929, was 1.2; in 1955, the ratio was 1.75; in 1956, 1.67. Net current assets in 1929 totaled $285 million; in 1956, that net was $1,400 million (table I).

The ratio of net current assets to average monthly expenses provides another measure of working capital. In 1929, net current assets were only three-fourths of average monthly expenses. In 1956, net current assets were more than twice as great as average monthly expenses (table II). The postwar ratio has never been less than 2 to 1.

The carriers have repeated the constantly reiterated claim that the industry is in critical shape because a smaller proportion of total traffic is being hauled by rail than in earlier years. It is true that other transportation facilities are growing faster than the railways, but it is not true that railway traffic is shrinking. The rails handled 500 billion traffic units in 1929, and over 700 billion units in 1956. Railway traffic last year was greater, per capita of our population, and much greater per dollar of net investment, than in 1930, or in the preceding decade; greater even than in 1929. Competitive handicaps under which the railways operate have not prevented their growth faster than the general growth of our population (table III).

The carriers have claimed that, as a result of current unfavorable conditions, funds for replacement or expansion of the railway plant are not available. In fact, however, the carriers have had an increasing fund available, from net profits and depreciation, to take care of these requirements. The year 1955 gave them their greatest total in net income and depreciation, with the exception of 1945. Last year, 1956, was the second highest in funds available from operation for replacement, additions, and betterments. The highest, 1945, was made so by special amortization action at the end of the war (table IV).

These funds have been largely invested in carrier plant and equipment since the end of World War II. The total of such investments has been $1312 billion; that represents $11,000 per employee. By comparison, the investment of all manufacturing industries in the United States, per employee, during the same period, was only $7,500 (table V).

The carriers have compared railway net income and those of other industries on the basis of net worth. The First National City Bank of New York, which publishes the figures cited by the carriers, makes these comparisons on two bases—the ratio of net income to net worth, and to gross revenue. The 1956 figures, just published by the First National City Bank, show the railway net income per dollar of gross revenue to have been 8.3 cents; the average for all transportation was 7.5 cents, for all industry, 6.3 cents, and for manufacturing, 6 cents. The highest returns were in public utilities (13.5 cents) and mining (10.3 cents). Lowest returns were for amusements (5.4 cents) and trade (2.6 cents). But the railway return per dollar of revenue exceeded the national average for all industry by 2 cents—more than 30 percent (table VI).

The national trend in net income per dollar of revenue is given in figures published by the Department of Commerce. The railway showing in 1956 is less favorable than at the 1929 peak; net income per dollar of revenue has dropped from 14.3 to 8.3 cents. But the average for all industry, measured by corporate

profits after taxes and the gross national product, has dropped from 7.9 to 5.2 cents. The railway showing was better in 1929 and in 1956, than the national average (table VII).

Railway wage costs have risen since 1929, but not quite as much as wage costs for American industry generally. Railway workers received 42.6 cents of every revenue dollar taken in by the carriers in 1929; 48.9 cents of every dollar of gross national product went to American workers in 1929. In 1956, railway wage costs took 51.1 cents of every dollar of railway revenue; workers in American industry generally received in compensation 58 cents of every dollar in the gross national product. Railway wage costs had taken 8.5 cents more of the revenue dollar, while workers in industry generally received 9.1 cents more of the revenue dollar than in 1929 (table VIII)

Much has been made, in carrier statements to the committee, of rising wage costs, attributed to improved wages and working conditions and higher payroll taxes. The facts in this connection have already been given the committee, but should be recalled now. Wage rates and payroll-tax rates were at their highest in 1956, in the postwar period. But labor cost per thousand traffic units was lower than in 1952, 1953, or 1954. Unit labor cost was the same in 1955 as in 1951 (table IX). Although there has been great inflation of the price level since 1945, labor costs in 1956 took less of the revenue dollar, and exactly the same proportion of operating expenses, as in 1946 (table X). Actual compensation figures, including payroll taxes, prove beyond question that the increased man-hour productivity of railway employees has more than compensated for the rising hourly rates and payroll taxes of the past decade.

General operating and financial results over the period since World War I were submitted with my earlier statement to the committee and need not be recapitulated here. On the basis of those operating results of traffic, reve nues, expenses, wage costs, net income, current net assets, and funds available for investment—there can be no question but that the railways are in the best of financial health, amply able to meet whatever increased costs they may not be able to avoid by modernized personnel policy, with the adoption of the unemployment-compensation bases in the proposed legislation.

TABLE I.Current assets and current liabilities, class I line-haul railways,

192956
[In thousands]

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Source: Interstate Commerce Commission, Statistics of Railways in the United States, Statement M-125.

TABLE II.Relationship of net current assets to railway operating expenses,

class I line-haul railways, 1929-56

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1 Current assets minus current liabilities. Source: Interstate Commerce Commission, Statistics of Railways in the United States, Statements M-100 and M-125.

TABLE III.—Railway traffic, railway investment, and population trends, 1929-56

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1 Population including Armed Forces overseas not available for 1929.
2 Estimated on basis of 1st 11 months.
3 Carriers' Exhibit No. 27, p. 3, Emergency Board Proceedings No. 116.

Source: Interstate Commerce Commission, Statistics of Railways in the United States, Transport Statistics in the United States; Statement M-220; Association of American Railroads, bureau of railway economics, Railroad Transportation; carriers' exhibit No. 27, Emergency Board Proceedings No. 116; U.S. Department of Commerce, Statistical Abstract of the United States; Joint Economic Committee. Economic Indicators, March 1957.

TABLE IV.—Net income and depreciation charges, class I line-haul railways in

the United States, 1921-56

(In thousands]

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1 Includes funds available for replacements, and additions and betterments.

Source: Interstate Commerce Commission, Statistics of Railways in the United States, Statements M-100 and M-125.

TABLE V.Postwar investment in new plant and equipment related to employ

ment, all manufacturing and class I line-haul railways

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1 Estimate.
? Preliminary estimate for 1st 2 months.

Source of basic data: U.S. Department of Commerce, Survey of Current Business, April 1952, April 1954, March 1955, and December 1956; Interstate Commerce Commission, Statistics of Railways in the United States. 1945–53. Transport Statistics in the United States, 1954 and 1955, Statement M-300, 1956; Joint Economic Committee, Economic Indicators, March 1957.

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TABLE VI.-Net income per dollar of gross revenues, leading corporations in the United States, 1956

Net income Industrial groups

per dollar

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revenues, cents Public utilities----Mining and quarrying-------Class I railroads------------Transportation --Grand total, all industries --Manufacturing--Amusements, services, etc----Trade

--------Source: First National City Bank of New York, Monthly Letter, “Business and Economic Conditions,” April 1957, "Net Income of Leading Corporations for the Years 1955 and 1956," p. 41.

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TABLE VII.—Railway net income per dollar of revenue and corporate profits per

dollar of gross national product

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1 Preliminary estimate of Association of American Railroads.

Source: Interstate Commerce Commission, Statistics of Railways in the United States, 1929, 1955; 1956 Statement M-100; U.S. Department of Commerce, Survey of Current Business; Association of American Railroads.

TABLE VIII.-Railway wage costs per dollar of revenue, and compensation of all

employees per dollar of gross national product

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1 Total wages chargeable to operations plus payroll taxes.

Source: Interstate Commerce Commission, Statistics of Railways in the United States, 1929, 1955; 1956 Statement M-100; U.S. Department of Commerce, Survey of Current Business; Association of American Railroads.

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