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“The Laundry Loses Business to Its Customers”: An Appeal to Exempt Personal Service Businesses from Federal Minimum Wage and Maximum Hours Legislation

Congress passed the Fair Labor Standards Act (FLSA) on June 25, 1938, the last major piece of New Deal legislation. The act outlawed child labor and guaranteed a minimum wage of 40 cents an hour and a maximum work week of 40 hours, benefiting more than 22 million workers. Although the law helped establish a precedent for the Federal regulation of work conditions, conservative forces in Congress effectively exempted many workers, such as waiters, cooks, janitors, farm workers, and domestics, from its coverage. In October 1949, President Harry S. Truman signed into law the Fair Labor Standards Amendments of 1949, raising the minimum wage to 75 cents hour and extending coverage, but still leaving many workers unprotected. In the following statement to the 1949 Senate subcommittee on FLSA amendments, an advocacy group representing power laundries warned that such legislation would result in a “ruinous effect” on the industry.

Statement of the American Institute Of Laundering before the Subcommittee of the Senate Education and Labor Committee Considering Wage-Hour Legislation (S. 653)

Position of the American Institute Of Laundering

The American Institute of Laundering on behalf of its members earnestly urges and recommends that all power laundries, as well as those other small business included in the classification of “personal service businesses,” as defined by the Bureau of Census, such as barber shops, beauty parlors, etc., be clearly exempted from Federal regulation of wages and hours. The detailed reasons supporting this position are set forth below.

Nature of Power Laundry Industry

At the outset, it is important to understand the nature of the some 3,800 power laundries, representing 85 percent of the dollar volume of all power-laundry sales, which comprise the membership of the American Institute of Laundering (hereinafter referred to as the AIL). Power laundries are essentially small local commercial enterprises which engage in the laundering of garments, linens, etc., primarily with the use of power-driven equipment. The average power laundry represents a capital investment of only approximately $100,000, with annual sales of about $110,000, and employing only some 50 or 60 employees. Of course, as with all averages, some laundries are larger than the average, and, of course, a great many more are smaller than the average. In this connection, however, it is not insignificant that of the 6,733 power laundries tabulated in the United States 1939 census, 5,174, or 75 percent were incorporated businesses.

It is a characteristic of this industry that laundering activities by their nature are necessarily confined to local trading areas. Laundries sell laundering services; they do not sell goods. Consequently, laundries differ from many commercial enterprises in that they have no product in the nature of goods for sale. As a result, laundries which confine their sales of services to their local communities do not inject goods into the stream of interstate commerce, and do not materially or substantially affect the flow of commerce between the States.

Because what laundries sell is laundering services, the principal item of cost in the operation of a laundry is its cost of services—or wages and salaries. In 1947 (the latest year for which an accurate figure is available) power laundries throughout the country disbursed approximately 62.5 cents of every dollar realized from sales in the form of wages and salaries. The extremely high relative proportion of pay-roll costs makes service trades unusually sensitive and vulnerable to statutes increasing required minimum wage rates. This characteristic of the industry is a principal reason why any forced or required increase in pay-roll costs is so extremely important to laundries.

As with other business enterprises whose activities are confined to community or local levels, laundry businesses are particularly vulnerable to competitive disadvantages, inequalities or discriminations at the local level of this trading. It is only at the local level that competition between these enterprises occurs. Consequently, when one enterprise in the community must raise minimum wage rates because he is covered by a Federal law, and his competitor need not do so, the one profits unfairly at the expense of the other. Sound public policy requires that our Federal laws must not be thus unjustly and inequitably discriminatory as between members of the same industry.

Finally, but far from least, a significant characteristic of the laundry business is the fact that its principal competition is furnished it by its customer—the housewife. When laundry prices go up—as inevitably they must if the proposed increased minimum is enacted—the housewife does the washing herself or hires a laundress. When this happens, as it will, laundries' sales fall off and laundries must reduce operations or close down.

The important significance of these characteristics of the laundry business in their application to the problems being considered by the committee, will become apparent in the material submitted to the committee herewith. It deals with—

I. The ruinous effect of an increased minimum wage on laundries, providing an appropriate statistical or factual showing as to same.

II. The discriminatory effect on laundries of the application of the 13 (a) exemption of S. 653—demonstrated in terms of laundries' past experience under comparable exemption in the present law.

III. Wage-and-hour regulation of local service trades should be effected locally.

IV. Only a complete exemption of power laundries from the Fair Labor Standards Act provides the solution to their grave problems. . . .

Laundries' principal competitor—the housewife

An important feature of the laundry industry—a characteristic which is basic to all its economic and operating problems—lies in the fact that its greatest competition comes from its customers—the housewife of the Nation. When she is faced with the alternative of buying laundry services or gasoline for her car, her dollar will go for gasoline, because she can’t make gasoline, but she can do the washing and ironing. When laundry prices go too high, the housewife does her own laundry and laundry work volume diminishes. When laundry sales volume drops, the laundry lays off employees. These employees—generally women (approximately 84 percent of all laundry production employees are women)—often become family laundresses and thus provide additional competition for the laundry’s bundle.

But, of course, no minimum wage applies to housewives or laundresses. Indeed, the housewife will work without any monetary compensation—not for a 75 cent or any other minimum established by statute.

Other types of laundry customers, such as hospitals, universities, barber shops, hotels, or other institutions will, and do, process their own laundry if laundry prices rise too high. Such organizations merely have to buy and install laundry equipment in order to have their laundry done, and the modern automatic washers make this idea very attractive from the cost point of view. Thus, the laundry is “between the devil and the deep blue sea.” Unless it raises its wages to comply with the required statutory minimum, it is in violation of the law and subject to the law’s substantial liabilities and penalties. If it does increase its wages to satisfy the minimum, it must also increase its sales prices. But the market will not absorb further increases in price of laundry services, so the laundry loses business to its customers. . . .

Source: Fair Labor Standards Act Amendments of 1949, Hearings before the Subcommittee of the Committee on Labor and Public Welfare, United States Senate, 81<sup>st</sup>Congress, 1<sup>st</sup> Session, on S. 58, S. 67, S. 92, S. 105, S. 190, S. 248 and S. 653, April 11–14 and 18–22, 1949. Washington, DC: U.S. Government Printing Office, 1949.