To support this statement statistics were presented which showed that zone employees total pay has increased only 20.1 percent from 1946-53 as compared with a 55-percent increase in the States; rents have increased 82.6 percent in the zone compared with 35.4 percent in the States; food prices 55.7 percent as compared with 43.1 in the States, and the income tax represented a 100-percent increase for zone workers as compared with only 11 percent for State employees.

During the course of the extra compensation survey, the consulting firm made factual comparisons of various compensation factors of Panama Canal employees with those in other Government agencies. of this area with private business firms on the isthmus. In the majority of the categories, the canal employees were found to have less compensation advantages than any private business and in many of the categories with other Government agencies.

In concluding the report on this phase of the study, the consultants listed the following major conclusions:

1. Conditions of work in the Canal Zone justify extra compensation for Canal Zone employees.

2. Compensation has been deteriorating in the Canal Zone for 7 years and has now reached the point where employees are dissatisfied and are leaving in large numbers, and,

3. Canal Zone compensation is not competitive with compensation paid elsewhere either in private industry or in Government.

In a letter transmitting to Congress the independent study on compensation of Panama Canal employees, Under Secretary of the Army Earl D. Johnson stated that in the opinion of Governor-President John S. Seybold and the Board of Directors of the Company “the study demonstrates clearly that not only should the present salary differential over United States base wages be retained but that additional compensation or offsetting benefits are required to be retained and added in order to secure for the Company and Government a compeitive recruiting position in the labor market and a stabilized efficient work force."

The Board of Directors concurred in the report and recommendations in principle and submitted the following comment concerning the specific recommendations as to how to accord the necessary compensation:

Recommendation 1: We concur that the present 25-percent differential should be retained. Both the report and the experience of the Company-Government administration confirm conclusively that a differential over and above the base United States wage is necessary in order to attract and to retain qualified employees for the canal enterprise. The consultant's survey demonstrates that the 25-percent differential alone is inadequate both in terms of retaining qualified employees and in meeting labor market competition, and that an overall differential in excess of 25 percent is indicated. Accordingly, retention of the present 25-percent cash differential is regarded as necessary as a minimum approach.

Recommendation 2: We concur that the differential should be tax free, and if for any reason Congress were disposed not to accept this approach, we urge that the same beneficial result, dollarwise, be achieved by some appropriate alternative means, such as by a commensurate increase in the precentage of cash differential. It is con

41866-54-pt. 2-14

sidered that tax exemption of the differential is justified and indicated. as a matter of principle, in the light of the nature and purposes of the differential and consistently with the exemption granted certain other differentials in the nature of cost-of-living quarters, and subsistence allowances.

Recommendations 3 and 4: While we agree in principle with the recommendations for rent reduction and free transportation, the questions involved are complex, and we should like to consider further the question of whether the exact methods recommended are the best ones to achieve the desired result of according the extra compensation benefits represented in these recommendations.

Recommendation 5: We concur that the present status of other fringe benefits should be retained, except that it is believed reasonable that the hospital and medical care benefits be continued in accordance with the recent congressional directive relative to the elimination of free hospitalization and medical care which takes effect January 1, 1954.

With this exception, it is considered that all other fringe benefits that may be involved in such matters as leave, retirement, community services, and transportation, should be continued as at present.

In December of last year I spent approximately 10 days on the isthmus in order to acquaint myself with all the problems firsthand. On my return I made a study of the congressional history of Public Law 841 and concluded that the execution of this law was not being carried out in accord with the intent of Congress.

In January of this year I conferred with the Hon. John J. Allen, Jr., chairman of the Subcommittee on Panama Canal Affairs of the Merchant Marine and Fisheries Committee with the thought in mind that his committee should hold hearings concerning the matter in which Public Law 841 and other legislation concerning the Panama Canal is being carried into execution by the administrating agencies, et cetera. Mr. Allen has informed me that he has received the green light from his chairman and proposes to hold these hearings in the very near future. One can readily conclude that the implementation of the recommendations made in the report and concurred in by the Board of Directors of the Canal Company will present a difficult task, and since these recommendations seem to be tied in together, or stating it another way, interrelated, I respectfully request this committee not to take restrictive or limiting action in regard to the 25 percent differential.

Now that is the general statement and I am certain that if there are any questions I will try to answer them that the committee might be interested in.

Mr. HAND. In one part of your statement you referred to the rapid loss of employees in the zone. Do you have any figures to indicate the difference between the voluntary termination of employment by employees of the company and other Government agencies either in or out of Panama.

Mr. DILWEG. No; I have not made that comparison as such. The only statement I can make there, Congressman, is that it was quite evident by the many persons who were leaving the zone that something was affecting it more than just the natural turnover. That was particularly true when the income tax went into effect and then if we

recall, when there was some question about the differential. Of course, I am sure that there are people who have made a career, staying down there 30 years, intend to stay there 30 years and they just cannot pull out. They have too much investment as far as their time and future is concerned.

But if you had been able to go down there and talk with the people as I did it was quite apparent that they feel very strongly, for example, about this income tax. Where somebody working for the fruit company is down there on a contract 18 months, he pays no tax. In many instances his income is earned right here in this country where as it happens the income that pays this person down there is earned in the Panama Canal. It is not so much that I would want to take a stand that I am against taxation because we are all paying taxes and we do not like it but it seems to me that there is an outstanding discrimination in that field.

Mr. HAND. We might be able to correct that by calling it to the attention of the Ways and Means Committee that these other United States citizens are escaping tax.

Mr. DILWEG. That may be true but you will note that in the Governor's statement there reference was made to the tax exemption of cost of living. That is allowed in other cases such as Hawaii and some of the islands in the Pacific and Alaska. I presume that that is probably one of the approaches that was made by this company when they were trying to justify and find some reason for that tax exemption. Actually the so-called cost of living is really not applicable to the 25 percent differential because it covers a great many other things such as repatriation, transportation back and forth to the country here every 2 years, things of that nature.

That was considered also. I am sure that the report is fairly accurate on the question of cost of living. I think that the cost of living as far as foodstuffs are concerned, it is about the same as Washington, D. C. They do not have the opportunity for varieties of foodstuffs and there is quite a problem, of course, to meet the requirements of all the people as to what they would like and keep more or less some general balance in the picture, but I would think that on the strict cost of living when it relates to foodstuffs it is on a par with Washington, D. C.

Mr. HAND. Would you advocate a reduction in the present cost of hospital care?

Mr. DILWEG. Well, the only position I could take there, Congressman, is this: That unfortunately the employee is not only paying for his hospital care but he is subsidizing the hospitalization of the socalled local rater.

Mr. HAND. Is he, or is the United States, or is the Canal Company? Mr. DILWEG. Well, the Canal Company has to be self-supporting and in being self-supporting we must include a facility like the hospital.

Mr. HAND. Of course you are familiar with the fact that their hospitals are not self-supporting?

Mr. DILWEG. That is correct.

As a matter of fact, for the first time they put in some sort of a fee arrangement in January, 1954. I believe you have that full schedule in the record already so I need not go into detail.

Mr. HAND. Even now the principal hospital losses are about a million dollars a year on its operation.

Mr. O'NEAL. Isn't it true very few hospitals in this country are self-supporting?

Mr. HAND. Perfectly true. I do not know of any that run at a profit. But this particular hospital to which we refer is running at a fraction of its capacity and a comparatively small operation and sometime runs around a million dollars a year annual loss.

Mr. O'NEAL. I would like to say I concur in what Mr. Dilweg has presented to you. I would also like to say that last year these people from down there came up, came to my office and asked for advice and I told them that having spent 12 years in Congress and on the Appropriations Committee that tremendous number of hardship cases came before the Appropriations Committee, all of them in some way self-serving, all of them in fact creating a certain amount of distrust in Congress. That is human nature. I thought the only way would be to get a totally independent group to investigate and see how many of their charges are based on fact and how many are based on a feeling that was not justified as to being discriminated against. I think partly out of that came this investigation, an impartial one, and finally, if I am informed about the investigation of this firm, pretty well substantiate what these people say.

I know they were in a distressed and fearful condition, tremendously upset about their situation and I just say one thing more. I have spent sometime in the Tropics. It may not impress some people the necessity for coming to this country once every 2 years. A man who lives in the Tropics who is not a native to that climate, either he deteriorates very rapidly or he must get some change. With personal reference I saw this in the Philippines when I was there and I gave more or less an order that every man connected with the American Embassy must go up in the mountains once a month on his vacation. In that way I think we got tremendously greater efficiency. They went up there 5,500 feet above sea level.

They could not take it in the Tropics day in and day out and something I do not mean the natives but people who are not used to that sort of thing-something has to be done to get them away from this terrific heat, not now and then but continually day and night all the time.

I was sympathetic with that point of view. All I have to say is I concur in what Mr. Dilweg says. I believe these people have not been too partisan in what they have said and what they have claimed has been fairly well substantiated by this independent investigation. Mr. DILWEG. I would like to volunteer this: That is that I have had some experience in building houses in my little city of Green Bay, Wis., and I was very much interested in looking over their housing situation down there, and very much surprised to see that the independent company like the fruit-growing company can put up a unit that is twice the house for around $13,900 compared to a unit put up by the Canal Zone Company down there at $16,800.

Mr. HAND. This committee looked that over with some disgust very recently.

Mr. DILWEG. It amazes me, the differential.

Mr. HAND. It should not be.

Thank you very much.

TUESDAY, FEBRUARY 16, 1954.

POWER PROFITS

WITNESSES

CLYDE T. ELLIS, EXECUTIVE MANAGER, NATIONAL RURAL ELECTRIC COOPERATICE ASSOCIATION, WASHINGTON, D. C.

NORWOOD SPEIGHT, MANAGER, WHITE RIVER VALLEY ELECTRIC COOPERATIVE, BRANSON, MO.

U. J. GAGAN, MANAGER, SOUTHWEST LOUISIANA ELECTRIC MEMBERSHIP CORP., LAFAYETTE, LA.

Mr. ELLIS. I would like to ask Mr. Norwood Speight to make the first statement.

Mr. SPEIGHT. Gentlemen, my name is L. N. Speight and I represent the Six-State Committee on Dams of the Southwest. It includes the States of Missouri, Kansas, Arkansas, Louisiana, Texas, and Oklahoma.

This committee represents a lot of cooperatives and municipal utilities and such like in the Southwest area. Our committee has responsibility from the members of our cooperatives and users of electricity in muncipalities, and so forth, of providing electricity, an adequate amount of electricity, at a reasonable cost for the consumers. We have to do some long-range planning in order to meet the ever-growing needs there and based upon past experience we find that the load grows to the extent where about each 5 years the electric load is doubled particularly in that area out there.

Now since the time is so limited today I am going to limit my remarks specifically to Table Rock Dam. You men are aware of the fact that Table Rock Dam was authorized by Congress under the Flood Control Act of August 1941.

Numerous studies have been made by various agencies, Government agencies and such like, and all of those studies have shown a favorable report on the dam. In fact there has been about a million dollars spent in the area in the study of the dam and it has been determined beyond any reasonable doubt it seems to us that the dam is feasible.

We do not think there is anyone now that questions the soundness of this project.

Now, the 82d Congress voted $3 million for actual construction of the dam and the access road was built to the dam, the headquarters buildings were erected, completed therefore the dam, a considerable amount of the property of the landowners has been purchased. Really the people in the area are in a state of fluctuation when we look at it from their standpoint.

Now, I would like to remind you that the 83d Congress appropriated some money, but there was some specific action taken by this committee, and I would like to quote from the Congressional Record of Tuesday, July 21, 1953, page 9594; this is the debate in the House as to when funds would be available for actual construction of the dam. This is quoting Mr. Davis, chairman of your committee.

My best recollection is that there has been about $1 million of that $3 million obligated, which means that there is being held in abeyance at the present time approximately $2 million.