areas or certain divisions which grew up out of preexisting local conditions.

So far as the shop crafts are concerned, the rates, I would say, are generally standard all over the country.

With respect to clerical employees and track laborers, there would be variations from railroad to railroad and from section to section. They are more or less the same employees, but there would be those variations.

Mr. AVERY. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Mr. Finney. Again, for the committee, I will say that we appreciate having this information contributed by your presentation.

Mr. FINNEY. Thank you very much for permitting me to appear this morning. I think, Mr. Chairman, in view of the fact that it is a quarter after 11, I would prefer to have Mr. Loomis come forward now and present his statement ahead of Mr. Monroe and Mr. Calhoun.

The CHAIRMAN. Mr. Loomis, we will be glad to have your statement. I believe you are chairman of the Association of Western Railways, Chicago, Ill.?

Mr. LOOMIS. Yes, sir, Mr. Chairman.

My name is Daniel P. Loomis. I am chairman of the Association of Western Railways. I am appearing in opposition to H. R. 4353. The CHAIRMAN. Mr. Loomis, it might be helpful to the committee if you could supplement your statement by giving us some additional information as to what your association is.

Mr. LOOMIS. In general, it is the class I railroads west of Chicago and the Mississippi River. It includes the Illinois Central, which is on both sides of the river. It includes the Chicago & Eastern Illinois, which is partly in eastern territory, and it also includes the Wabash, which is, in part, in eastern territory. But, generally speaking, it is composed of railroads west of Chicago and the Mississippi River. The CHAIRMAN. The members of your association also have membership in the Association of American Railroads?

Mr. LOOMIS. Generally; yes, sir. Witnesses who follow me will present evidence with respect to the cost of present railroad retirement and unemployment insurance taxes to the railroads and the additional cost of the proposed legislation, and I shall not attempt to deal in detail with those questions.

There will also be presented to the committee the views of the railroads with respect to changes which should be made in the present provisions of the Railroad Unemployment Insurance Act and the railroad position with respect to the proposed amendments to both the Retirement and Unemployment Insurance Acts.

One of the provisions of the present Unemployment Insurance Act which the railroads consider to be most unfair is contained in section 4 (a) (2), which, in effect, permits an employee to draw unemployment benefits when his unemployment is due to a stoppage of work because of a strike which was called without being in violation of the provisions of the Railway Labor Act or in violation of the established rules and practices of a bona fide labor organization of which he is a member. Since the unemployment-insurance fund is financed wholly from taxes paid by the railroads, the result of the provision is that the railroads are required to finance, at least in part, a strike on the part

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of their employees against themselves. This appears to the railroads to be a one-sided and wholly unfair provision. The Railway Labor Act provides for negotiation, mediation, arbitration, and, under section 10 of the act, for the appointment of Presidential emergency boards. Consider, for example, a case which has happened many times, where it is not settled in negotiation or mediation, the carriers agree to arbitrate but the labor organizations decline. An emergency board is appointed which makes its recommendation to the President for settlement. The railroads agree to accept the recommendation and the labor organization declines to accept the recommendation and calls a strike. How can it be consistently argued that such a strike should be financed out of funds supported entirely by the money of the railroads? Certainly the Congress should give due consideration to such an unfair statutory provision.

I also serve as chairman of the western carriers' conference committee, which represents the western railroads in dealing with the railway-labor organizations in concerted movements affecting wages, rules, and working conditions.

Since last November 1, the American railroads have signed a series of agreements with railway-labor organizations representing more than 80 percent of the railway employees which will result in increased costs to the railroads of 1212 cents per hour effective November 1, 1956, an additional 7 cents per hour effective November 1, 1957, and a further increase of 7 cents per hour effective November 1, 1958. These agreements also contain an escalator provision related to the United States Bureau of Labor Statistics Consumer Price Index which provides for adjustments in accordance with the fluctuation of that index every 6 months during the period of the agreement, which runs until November 1, 1959, and thereafter unless changed by subsequent agreement. Under the last published monthly figure for the Consumer Price Index the railroads will encounter an additional cost of 3 cents per hour May 1 of this year. The floor under the agreements is the basic increases therein provided. In other words, wages cannot be reduced below the figure obtaining on October 31, 1956, plus the stipulated wage increases to which I have referred, but they can be adjusted above that figure in accordance with fluctuations in the Consumer Price Index.

The minimum cost of these settlement agreements, applied to all class I railroad employees, based on 1955 employment will be an annual increase in round figures of $674,500,000. The additional 3-cent adjustment, which now appears likely to come into force on May 1, 1957, will add approximately $75 million to this figure.

The pattern settlement is a very expensive proposition for the railroads to undertake, but it was worked out with the thought in mind that both the railroad companies and the railroad employees would have a period of stability at least until November 1, 1959, during which the railroads could actually figure what their costs would be, could plan ahead with respect to their operating expenses and capital expenditures for needed additions and betterments, and the railroad employees would likewise have a period of stability wherein they could have fixed wage increases and also have protection against increases in the cost of living.

The first agreement was executed in November 1, 1956, with the 11 organizations representing nonoperating employees.

The next agreement was with the Brotherhood of Locomotive Firemen and Enginemen on November 20, 1956, and on Friday, March 8, 1957, a similar agreement was signed with the Switchmen's Union of North America.

A Presidential emergency board completed hearings in the case involving the Brotherhood of Railroad Trainmen and filed its report with the President on Friday, March 15, 1957. The Board recommended a settlement to conform to the pattern agreement with other groups.

Similar agreements have been signed with many other organizations representing smaller numbers of employees, so that better than 80 percent of the railway employees are already covered by the pattern settlement.

The proposed legislation would add further very substantial burdens to operating costs of the railroads; would impair their ability to meet competitive conditions; would affect adversely necessary additions, betterments and improvements in methods; and would disrupt the whole pattern of fixing railroad labor costs over the next 3 years that was envisaged when the settlement agreements were first adopted. I cannot state too strongly that in making these agreements the railroads assumed every dollar of additional cost that they thought they could bear over this period and that we thought we had fixed our labor costs over such period dependent only on fluctuation in the cost of living.

Of course, we did understand that we had to deal with some sort of proposition which would cover the amendments to the Railroad Retirement Act made last year providing for increases in benefits, but we did not anticipate any such increase in costs as is contained in the proposed legislation now before this committee.

In making these agreements I think it is fair to say that we assumed that business would remain sufficiently good during the period of the agreements to enable us to meet the very heavy impact of the increases in wages, but we thought that a period of stability in railroad costs and an opportunity to plan and fix rates accordingly, was worth taking that chance.

I cannot put it too strongly that in making these agreements we thought we were taking the risk of paying out in labor costs every dollar that the railroads could possibly afford and we simply cannot stand a further increase over and above the amount necessary to pay the costs of the benefits enacted by the Congress last year and made effective July 1, 1956. Therefore, and also for the reasons stated by other witnesses in their presentation to the committee, we respectfully urge that the committee confine its consideration of H. R. 4353 to providing funds only to cover the additional benefits under the Railroad Retirement Act enacted by the Congress in 1956.

I would also urge that the committee give very careful consideration to the proposals to be discussed by Mr. Calhoun with respect to amendments to the Railroad Unemployment Insurance Act.

Now I would like to comment on the testimony presented by Mr. Oliver with respect to unemployment.

There would appear to be an indication in his testimony that the railroads could profit in some way by hiring new employees instead of older employees furloughed at some other point. That is not the fact, and I do not think Mr. Oliver intended to create that impression.

Under practically all labor contracts in the railroad industry the rates of pay are fixed for the job and the employee filling the job receives that rate whether he has 6 months' service or 20 years' service. A machinist, for example, receives the machinist's rate whether he has 1 year's seniority or 30 years.

There is, therefore, no monetary incentive for a railroad to hire a

new man.

And I should say this, to avoid any misunderstanding: that it should be said that labor contracts generally prevailing in the railroad industry-under those contracts a carrier has no option whether to reemploy within his seniority district a person who has previously worked for that railroad, except in cases where that person has resigned or been fired for cause. Generally speaking, an employee who is out of employment becomes a furloughed employee, and if any vacancy arises which his seniority would entitle him to fill, he must be notified by the carrier and has an absolute right to return to work and fill the position available. If he chooses not to return within whatever stated period of time may be provided in the contracts, then he does lose his furlough status and is eliminated from the seniority roster. But the option is that of the employee and not of the carrier. It is true that there are problems in connection with placing employees. One is seniority. The railroad industry under its labor contracts generally operates on a strict seniority basis. Seniority is generally confined to a point or district. If an employee is furloughed at point A or district A, he would have no rights at point B and if he took a job at point B he would start as a new employee at the bottom of the seniority list. Even though he might have had 15 years' service at point A he would be junior to a man with 3 months' service at point B. The railroad unions have been very reluctant to change the contract provisions or to give such an employee any credit for his prior seniority at another point even on the same railroad and even when an entire shop, roundhouse or other facility is being closed.

Just to give an example, a few years ago we proposed to one of the labor organizations that we give journeymen mechanics a seniority date as a helper so that if a man were displaced as a mechanic he could exercise employment rights as a helper. I think the particular organization wanted to adopt the proposal but, because of the views of affiliated organizations, they rejected it. As a result the mechanics did not get flow-back rights to work as a helper if displaced as a mechanic. There was another feature in that discussion; that where helpers are upgraded to mechanics-and generally you cannot upgrade a helper to a mechanic; helpers do not serve the full 4-year apprenticeship, but where there is a shortage of mechanics an apprentice is not qualified. Under most contracts you can upgrade helpers. After he has worked as a mechanic for 4 years, the same as an apprenticeship would be, he is entitled to take a seniority date as a mechanic. But under the agreements he has to make his choice whether to give up his helper's seniority and take a seniority date as a mechanic, or to keep his helper's seniority date, which naturally would be old, and not take a seniority date as a mechanic. If he chooses to retain his seniority as a helper, he, of course, can be bumped as a mechanic at any time.

On the other hand, if he chooses to take the seniority date as a mechanic and is bumped off in a reduction of force, he could not go back to work as a helper, because he had been forced to give up his seniority.

Another example: In 1954, the Pullman Co. was perfectly willing to transfer the men to another of their shops and to dovetail their seniority in with the seniority of men already employed at those other shops but the unions opposed any such plan and would not agree to give seniority back of the date when the Atlanta shop was closed.

The same situation applies when a employee is furloughed on railroad A and take a job on railroad B.` He has to start as a new employee.

If a change involves moving one's place of residence, the furloughed man may not wish to move. He may not wish to cross craft lines.

A man furloughed at San Francisco on the Southern Pacific could not be used or required to fill a job on the New York Central at New York City unless he wants to move to New York and it would involve all the complications of notice, moving, et cetera. Where a man has to move to a new location and has to take new seniority at that point, he may not consider it worthwhile to take the chance that he be bumped there off his new job within a short time and undergo the expense of moving or of transferring with that risk. Therefore, I think it is true that many men would prefer to take the unemployment insurance in the hope that there will be a pickup or an increase in business activity that would enable them to go back to work at the point where they had been displaced.

Seasonal variations have their effect. Ore from Minnesota generally does not move in the winter months. The bulk of truck work in the North must be done in the summer months.

It has been true that some railroads in hiring new employees may have age standards but many of these have been relaxed.

Certainly it has been true in my experience in recent times that the Railroad Retirement Board and the railroads have been making serious efforts to handle the problem of displaced employees.

I do want the committee to understand some of the problems that are encountered in those efforts and particularly to understand that there is no incentive whatever to a railroad to hire a new employee in preference to a displaced employee and no basis in fact for any implication in that respect.

It should also be kept in mind that every increase in labor cost, whether it be in the form of an increase in wage rates, health and welfare benefits or payroll taxes forces the railroad to economize and consequently adversely affects employment opportunities. The industry simply does not have the money.

That completes the statement, Mr. Chairman.

The CHAIRMAN. Thank you very much, Mr. Loomis, for a very fine statement on this subject from the standpoint of the railroad industry. I wonder if we have any questions? Mr. Hale.

Mr. HALE. I suppose the ideal railroad would operate like a guided missile, with no employees at all.

Mr. LOOMIS. I do not think we will ever reach that point, Mr. Congressman.