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KANSAS STATE IINIVPSITY LIPRARIF,

NOMINATION

GOVERNMENT

Storage

HEARING

BEFORE THE

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nj COMMITTEE ON

BOR AND PUBLIC WELFARE

E UNITED STATES SENATE

NINETY-FIRST CONGRESS

FIRST SESSION

ON

GEORGE P. SHULTZ TO BE SECRETARY OF LABOR

JANUARY 16, 1969

Printed for the use of the Committee on Labor and Public Welfare

IT. S. GOVERNMENT PRINTING OFFICE

_4-234 WASHINGTON: 1969

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COMMITTEE ON LABOR AND PUBLIC WELFARE

RALPH YARBOROUGH, Texas, Chairman

JENNINGS RANDOLPH, West Virginia

HARRISON A. WILLIAMS, JR., New Jersey

CLAIBORNE PELL, Rhode Island

EDWARD M. KENNEDY, Massachusetts

GAYLORD NELSON, Wisconsin

WALTER F. MONDALE, Minnesota

THOMAS F. EAGLETON, Missouri

ALAN CRANSTON, California

HAROLD E. HUGHES, Iowa

JACOB K. JAVITS, New York

WINSTON L. PROUTY, Vermont

PETER H. DOMINICK, Colorado

GEORGE MURPHY, California

RICHARD S. SCHWEIKER, Pennsylvania

HENRY BELLMON, Oklahoma

WILLIAM B. SAXBE, Ohio

ROBERT 0. HARRIS, Staff Director

JOHN S. FORSYTHE, General Counsel
CONSIDERATION OF THE NOMINATION OF GEORGE P.

SHULTZ, TO BE SECRETARY OF LABOR

THUSRDAY, JANUARY 16, 1969

U.S. SENATE,

COMMI1 rEE ON LABOR AND PUBLIC WELFARE,

Washington, D.C.

The committee met at 10 a.m., 'pursuant to call, in room 4232, New

Senate Office Building, Hon. Ralph W. Yarborough (chairman of

the committee) presiding.

Present: Senators Yarborough, Randolph, Williams, Kennedy,

Mondale, Eagleton, Cranston, Javits, Prouty, Dominick, Murphy,

Schweiker, Bellmon, and Saxbe.

The CHAIRMAN. The Committee on Labor and Public Welfare will

come to order for the purpose of hearing the new Secretary-designate,

the Secretary of Labor.

Before we do, I want to recognize the new members of this committee, and say how proud we older members are—that is, older only in

point of service on the committee—to have you join us.

We are extremely proud of this committee and we are grateful to

both of our parties for the vigorous men who have been picked to

serve on it, who have made fine records in the past, five of you in your

own States and one in the Congress.

We are joined by two former Governors, a former Lieutenant Governor, and a former attorney general of the State, a former comptroller

of his State, and one member who served four terms in the House.

Not all of the new members are here. There are other hearings going

on in the Committee on Interior and Insular Affairs and the Committee on Banking and Currency, and also the Committee on Post

Office and Civil Service.

Our attendance today is limited because of hearings on other Cabinet

officers by other committees. However, I do want to introduce those

of the new members who have joined us for the first time this morning.

Senator Eagleton, of Missouri, is here. He is a former Lieutenant

Governor, widely known over the country for the vigor of his State

office holding, and the vigor of his campaign.

Next to him is Senator Alan Cranston, of California, also known

for his campaigns in California, a State of 20 million population. I

had the privilege of knowing him before either of us were elected and

while we were both campaigning some 10 or 12 years ago.

We also have Senator Schweiker, of Pennsylvania, who served four

terms in the House, and whose fame preceded even his election.

We have here Senator Saxbe of Ohio, a former attorney general. I

am beginning to think that there must be a little union of former attorneys general. There are Senators from both parties who have been

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attorneys general and I knew them in the Attorneys General Association before greeting them here.

So we have people who have made records upon which they could be

elected to the Senate. They were elected on fine records they had previously made in government.

We are very happy to welcome you to the committee. We expect to be

joined by Senator Bellmon of Oklahoma later this morning. He is at

another committee meeting. He was Governor of Oklahoma. Here he

comes now. This is Senator Bellmon of Oklahoma, a neighboring

State to mine. He has made a notable record.

Senator JAVITS. Mr. Chairman, I just wanted to join the chair in welcoming the new members on both sides of the aisle or horseshoe, and to

express our particular satisfaction, as the chairman has expressed his

satisfaction, that there is so much talent in this committee.

I wish to note too Mr. Chairman, that although there are 100 of us,

the Senate is a hard place to get to, and that each of these men represent a lifetime of experience and the highest endeavors of which our

Nation is capable.

I take great personal satisfaction that the body to which all of us

have given so much time and effort attracts the patriotism and the

brains and the character which is represented by the new members of

the committee of both parties.

The CHAIRMAN. Thank you, Senator Javits, the ranking member of

the minority on this committee.

Senator JAVITS. If the chair will yield further, I would like to call

the attention of our designee and Senator Percy and the committee to

the fact that we have a new chairman. Senator Yarborough presides

for the first time over the Committee on Labor and Public Welfare.

A little later in the morning, as soon as Senator Prouty arrives, I

will properly mark the occasion but I do not wish to have the opening

of the hearings go by without paying our respects to the distinguished

man who mine from very, very humble surroundings and background

to attain so high a position as the chairman of this committee, and

whose dedication to the causes for which we labor is unparalleled in

the annals of the committee, in my judgment.

His incumbency will be most auspicious and helpful to our people

in our time.

The CHAIRMAN. I am very grateful to the distinguished Senator

from New York for his generous words regarding me. I feel rather

humble that he should say what he did when I know of the great difficulties he had to overcome. He had to fight all of those forces first

in his own State as a statewide officer and then by election to the Senate

and an overwhelming re-election.

I can say with fuller measure about him truthfully and accurately,

that everything he has said about me as a Horatio Alger is out of style,

but it is not out of style if you read Horatic Alger's story and read

the story of Senator Javits life.

He has a prestigious and powerful position and position of leadership not only in the Senate and in his party but in the whole country.

Senator Javits, I think you and I are patting each other on the

back about our new members. We are grateful to our parties and to

their caucuses for the members they have assigned to this committee.

It is in keeping with the record of accomplishment and drive of this

committee in the past.
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Now, we have before us a man who has been designated by the

President-elect as the Secretary of Labor-designee. He is accompanied

by a distinguished Senator from Illinois, a Senator from his home

State, Senator Percy.

We have here a biographical sketch of Mr. Shultz. I will order that

placed in the record and you may proceed in your own manner.

(The document referred to follows:)

BIOGRAPHY OF GEORGE P. SHULTZ, NOMINATED To BE SECRETARY OF LABOR

Born: New York City, December 13,1920.

Wife: Helena M. O'Brien. Born Nashua, New Hampshire.

Children: Margaret Ann, Kathleen Pratt, Peter Milton, Barbara Lennox, and

Alexander George.

Degrees: BA.. Cum Laude (Major in Economics and School of Public and

International Affairs), Princeton University, 1942; Ph. D., Industrial Economics,

Massachusetts Institute of Technology, 1949.

Academic appointments:

1948-57: Member of the faculty, Dept. of Economics, M.I.T., with rank

of Associate Professor, 1955-57.

1954-55: Acting Director, Industrial Relations Section, M.I.T.

1957: Professor of Industrial Relations, Graduate School of Business,

University of Chicago.

1962: Dean, Graduate School of Business, University of Chicago. On leave

1968-69 as Fellow at Center for Advanced Study in the Behavioral Sciences,

Standard, California.

Nonteaching Positions :

193: Member, arbitration panels for labor-management disputes in a

wide variety of industries including electrical equipment, farm implements,

textiles, chemicals, food products, and metal fabricating.

1955-56: Senior Staff Economist, President's Council of Economic Advisers.

1t',50—(10 : Consultant to the Office of the Secretary, U.S. Department of

Labor; Member, Steering Committee, Study of Collective Bargaining in

the Basic Steel Industry, issued by U.S. Department of Labor, 19430; Director, The Public Interest in National Labor Policy, by an Independent Study

Group and issued by the Committee for Economic Development, Fall, 1961.

1962-62: Consultant, President's Advisory Committee on Labor-Management Policy.

1961-62: Member, Governor's Committee on Unemployment (Illinois).

19432: Co-Chairman (with Clark Kerr), Automation Fund Committee

(Armour & Company; United Packinghouse, Food and Allied Workers of

America; Amalgamated Meatcutters and Butcher-workmen of North

America.)

1962: Member, Board of Trustees, National Opinion Research Center.

1963-66: Member, Executive Board, Industrial Relations Research Association (3-year term).

1963-64: Member, Governor's Committee on Job Vacancies (Illinois).

19434: Member, Board of Directors, Borg-Warner Corporation.

1964-68: Member, Board of Directors, J. I. Case Corporation.

1965: Chairman, special Task Force appointed by the Secretary of Labor

To Review the Operations of the Federal-State Employment Service.

1965-67: Member, Research Advisory Board, Committee for Economic Development (3-year term).

1966: Member, Board of Directors, Stein, Roe & Farnham Stock and Balanced Funds) ; Visiting Committee, Department of Economics, M.I.T.; Member, Board of Visitors, United States Naval Academy; Member, Board of

Directors, General American Transportation Corporation.

1967: Member, Board of Directors, Chicago Association of Commerce &

Industry; Economic Club of Chicago; Committee on Honors and Awards,

American Economic Association.

1968-69: President, Industrial Relations Research Association.
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Membership in Professional Associations: American Association of University

Professors; American Economic Association; Industral Relations Research Association; National Academy of Arbitrators.

Military Activities:

1942-45: U.S. Marine Corps, active duty.

1945-55: U.S. Marine Corps, inactive duty.

1955: Honorable discharge with rank of Major.

January 1969.

The CHAIRMAN. First, we will have an introduction by Senator

Percy. Senator Percy is recognized, and you may judge then, Mr.

Shultz, after he finishes, as to whether you need a further statement.

STATEMENT OF HON. CHARLES H. PERCY, A U.S. SENATOR FROM

THE STATE OF ILLINOIS

Senator PERCY. Thank you very much. I feel very privileged to be

here at this initial meeting of this committee.

I saw a great deal of three of the new members during the course of

the past campaign. I also have a high regard for the members of the

opposition on the committee. I hope the tranquillity in this room and

the good feeling existing among the members of this committee is

characteristic of the kind of tranquillity and good feeling we will have

in labor-management relationships in this country in the next few

years.

I can't think of any friend of mine of longstanding or distinguished

member of the academic field that I could commend more highly to this

committee than George Shultz.

I think this has been one of the truly great appointments of the

President-elect.

George Shultz is not a native originally of Illinois. He was born in

New fork City. He received his education at Princeton, took his

doctorate at MIT and joined the faculty there as a professor of

industrial relations. He subsequently was appointed dean of the Graduate School of Business at the University of Chicago.

While at the University of Chicago he served in a very distinguished

manner, not only in the academic community there but also as a

director of various corporations. As a consequence he is well versed in

industrial relations from the management standpoint.

His perspective has been broadened by his service in the financial

community as a director of a mutual fund.

George Shultz' experience in management is well balanced by a lifetime spent in association with the labor leadership of this country. He

has mediated a number of disputes. He has served his Government both

as a senior staff economist of the President's Council of Economic

Advisers, and as a consultant to the Secretary of Labor.

He is held in the highest regard in his own community that he has

lived and worked in for a great part of his life, and in the academic

community. I know of no appointment made to date that has received

greater acclaim simply based on the fine reputation that George Shultz

has developed for fairness, for integrity, for intelligence, and for his

ability to institute effective remedial action thereon.

I am very honored, indeed, to present him to this committee.

The CHAIRMAN. Thank you, Senator Percy.
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For fear that the Secretary-designee might be a little embarrassed

in stating them, I want to read here that he received his bachelor of

arts degree, cum laude

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from Princeton University with a major in

economics in the school of public and international affairs.

He received his Ph. D. in industrial economics from the Massachusetts Institute of Technology.

He was a member of the faculty in the department of economics of

MIT, with a rank of associate professor, from 1948 to 1957 and was

acting director of the industrial relations 'section, MIT, from 1954

to 1955.

He was professor of industrial relations, graduate school of business of the University of Chicago from 1957 to 1962.

He became dean of the graduate school of business for the University of Chicago and was on leave from 1968 to 1969 as a fellow at

Center for Advanced Study in the Behavioral Sciences of Stanford

University.

His nonteaching achievements are about two pages long, and we

will file that for the record, but I wanted to give a little of his academic background because I felt that the questions might go into

other activities more than the academic background, and I was fearful

that it might be overlooked.

STATEMENT OF GEORGE P. SHULTZ, NOMINATED TO BE SECRETARY

OF LABOR

Mr. SHuurz. Mr. Chairman and members of this distinguished

committee, and my friend Senator Percy. I wish to state how pleased

I am to see you here in Washington and how grateful I am to you

for introducing me here.

My name is George P. Shultz, and I appear here before you today

as President-elect Nixon's nominee for the position of Secretary of

Labor.

Senator Percy has stated that I was born in New York City on

December 13, 1920. The past 11 years I have been a resident of Illinois.

Both Senator Percy and the chairman have mentioned my educational

background.

I would like to add a personal note on that. I suppose in each

person's educational experience, certain people stand out.

As a senior at Princeton I was fortunate to have as a close faculty

associate, Mr. Edward Lundy, who got me interested in economics.

He is now vice president of the Ford Motor Co., a very eminent

man, and I am proud to be associated with him.

At MIT, where I went to study for a doctorate, I was fortunate in

meeting Prof. Douglas Brown, who really got me interested in the

employment, unemployment, and labor relation aspects of this field—

a great teacher that I wish to acknowledge.

Also, at MIT, I was fortunate in associating with the late Joe

Scanlon, who came there to the faculty from the Steelworkers Union,

a man who worked out very constructive union-management relation

plans, and I was privileged to go around with him to many local

union-management situations and see a person in action who I think

had an unparalleled sense of the human side of enterprise.

So those three people, I might say, have been the informal educators as distinct from the formal side that was mentioned earlier.
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Let me just comment with respect to the various boards that I

served on and about my intent insofar as my own personal activities

are concerned.

First of all, with regard to my assets, which are unfortunately

modest, nevertheless, I wish to see them handled properly.

I have had drawn up and will put into effect, if I am confirmed,

a so-called blind trust under which a trustee will manage those assets

for me.

I will not know what holdings there are in the trust or about the

transactions taking place.

When it comes time for me to file an income tax return I will

know only the amount involved insofar as income or capital gain

and losses are concerned, and will refer the Internal Revenue Service

to the trustee should they wish to have more detailed information

about what goes on there.

Senator JAVITS. Dean Shultz, that is not actually provided in the

trust document, but this will be your instructions to the trustee and

this is the way you will actually conduct your affairs while you are

in office.

Mr. SlimNz. That is correct. Thank you, sir.

I plan to resign from almost all of the activities that I am involved

in, from the board of directors at Borg-Warner J. I. Case, General

American Transportation Corp.; Stein, Roe & Farnham Stock &

Balanced Funds.

I will resign as dean of the Graduate School of Business of the

University of Chicago.

I would like to take advantage of the kind offer of President Everett

Levi of the university to go on an indefinite leave of absence. It is

a wonderful university, and I would like to remain associated with

it. So if the committee is agreeable and the Senate is agreeable, I

would like to take him up on that and also maintain minimum professional associations with various other groups.

Senator JAyrrs. Mr. Chairman, I have one question in that connection. .

Are we to assume that the President-elect is agreeable to what you

desire in this respect?

After all, it is him under whom you serve. We must know about

it and if we are unhappy we will protest, and we have a right not to

confirm if we choose.

But the important thing is that we should know that this is satisfactory with the President-elect.

Mr. SHULTZ. This has been very thoroughly gone over with his

counsel and I have mentioned it to him, but mainly I have worked

with his counsel on this matter. I should say also I will resign from

the Union-Management Automation Fund Committee at Armour Sz,

Co. on which I have served as cochairman with my friend Clark

Kerr from California for a number of years. I will be out of that

activity.

I would like to say also that I am deeply honored that Presidentelect Nixon has nominated me to the post of Secretary of Labor.

The Department of Labor through the laws and programs that it

administers plays a vital role in helping to promote the health and

strength of our economy, and the 80 million people who comprise its

work force.
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Throughout my professional career I have been concerned with

and involved in many of the special areas for which the Department

is responsible.

If I am confirmed I will do everything within my power to manage

the Department and administer its programs, with one overriding

concern—the promotion of the welfare of all workers, whatever their,

race, color, or creed, whether they are organized or unorganized,

whether they are blue collar or white collar, all workers in this country

in a manner consistent with the public interest.

Thank you, Mr. Chairman.

The CHAIRMAN. I want to state to the committee that Mr. Shultz

came to me some days ago and asked me about the requirements of

divestiture of interest or placing in a trust fund of his private holdings.

We did not have an opportunity to confer with the committee in

executive session because the new members had not been picked.

However, I served on the Commerce Committee for 7 years, and

the system that Senator Magnuson and the ranking minority member,

Senator Cotton, at that time had worked out, worked very well there.

Many heads of the agencies come before that committee for confirmation, and so in the absence of an opportunity to take it up with

the full committee I suggested to Mr. Shultz that he file a copy of the

trust agreement with me and with Senator Javits.

We would examine it, and if satisfactory to us we would so state

and then if any member of the committee desires to see it they have

that right.

Senator Javits and I have each a copy of that, we have examined it,

and in executive session if any member of the committee desires to go

over it I think that can be done. •

We are satisfied except to note that Senator Javits has mentioned

that the trust be placed under the conditions Mr. Stanns placed

his.

Under such a trust the trustee prepares income tax returns, and the

nominee is completely relieved not only of the obligation but knowledge

as to how it was being managed.

I make that statement before the questioning starts. We have copies

of the trust agreement for examination.

The ranking member on this committee is chairman of another

important committee and he must chair a hearing, and I yield to

Senator Randolph first.

Senator RANDOLPH. Mr. Chairman, I am reassured that I shall have

the opportunity of serving under your able chairmanship of the Labor

and Public Welfare Committee. Your able service and progressive

leadership will be a continuation of the tradition of splendid men, men

of compassion and courage, regardlss of party, who have served on this

committee and who have served as chairmen.

Mr. Shultz, in the Federal Highway Act of 1968, we wrote into

the language of that legislation an equal employment opportunity

provision.

We are having hearings at the present time because there apparently

is a conflict, many conflicts in reference to guidelines that are being

proposed and laid down within agencies of the Federal Government

to carry this program forward.

The Labor Department has been the primary agency responsible for

the overall Federal effort in this area. The Federal Highway Admin24-234-69-2
8

istrator has a separate responsibility with regard to the Federal-aid

highway program. There seems to be, and I use the words advisedly,

"seems to be" a conflict between agencies of Government as to exactly

what is intended by the Congress in equal employment opportunity.

I want you to know that I am strongly in favor of the policy. It was

at my initiation that it was written into this Act. I think, however,

that you will have, of necessity, an obligation to check very carefully

into what appears to be overlapping rules and regulations which seem

to be at variance from one agency to the other, and within agencies

under the umbrella of the various departments of Government in

reference to the employment of men and women on public projects.

I would hope that you would tell me this morning that you would

take a careful look at this as soon as possible after you go into your

position as the Secretary of Labor.

Mr. SHULTZ. I certainly will do so, sir. I would add insofar as equal

employment opportunity is concerned, that I deeply believe that this

is a very important thing for us to achieve in the United States, and

that in the relatively small ways that have been available to me at the

University of Chicago and in the various union-management situations

that I have been involved in, I have tried to work hard to see that we

conduct ourselves in line with the spirit of equal employment and equal

educational opportunity.

Senator RANDOLPH. Mr. Chairman, I am grateful for the response

of Mr. Shultz. I think he will be doing a genuine service not only to

the Government but especially to the American people if he does go

into this matter very quickly at the outset.

Mr. Shultz, we do not want conflicts that will cause any disruption

because something is being added to the programs of construction

of public works.

I think it is time for calmness, for a deliberative approach, realizing that the policy' has been spelled out and it is the Intent of the

Congress that it be carried out. It will call for men of judgment who

are knowledgeable of the conditions and who are dedicated to making

this work for the citizens of the United States.

That is the reason this morning that I press upon you the importance of giving this your attention to this matter at the earliest

possible date.

Mr. SHULTZ. Thank you, sir.

The CHAIRMAN. Before this distinguished Senator—Mr. Randolph—

from West Virginia leaves to preside at another hearing, I want to

say how grateful I am for his kind remarks about me.

I want to say what a fine service he gives our Government. As

ranking majority Member he had a choice for three chairmanships

in this committee. We have very strong subcommittees in the field of

the whole American economy, labor, manpower and poverty, health,

and education.

Senator Randolph is particularly interested in education because

he was dean of a university. He has taught in several institutions.

He has been on the governing board of three different colleges and

universities in America. Our colleague has been an editor as well as

an educator. He was for many years a business executive, and knows

the problems of labor and management.

With his great background in education, in labor, and related fields,

he considered the subcommittees he could chair but he told me: "As
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chairman of the Public Works Committee and our subcommittee on

roads and three other subcommittees, I do not believe I can do justice

as chairman of our important subcommittees which have so much

work. I waive all of them."

He has waived the chairmanship of many standing subcommittees.

Very seldom do you find a man in pUblic office that would give up that

position of power. This attitude is characteristic of his devotion to Senate service.

We honor you for your dedication to this office, Senator Randolph,

and for the great and good judgment and ability you have brought

to this committee for over 10 years.

We appreciate very much the spirit in which you serve in this body.

I am evermore grateful for his dedicated service than for the flattering statements he said about me. I know he'll continue as the active

and effective ranking majority member of this committee.

Senator PRourr. Mr. Chairman, I would like to associate myself

with the remarks just made by the distinguished Senator from West

Virginia in paying tribute to the new chairman.

I have had the opportunity to serve with him on this committee for

many years. He has been a gentleman, courteous and helpful at all

times, and I look forward to working under his leadership.

Also, I should like to welcome the new members to the committee.

I am sure they will find it a challenging and exciting assignment.

The CHAIRMAN. Thank you, Senator Prouty.

It has been a great privilege to serve with you.

Senator Javits.

Senator JAVITS. Dean Shultz, first, I would like to express my

satisfaction that the President-elect has chosen in my judgment so

relevant and distinguished an academician as Secretary of Labor.

There is much concern in the country over how conservative this administration might be.

The decision in the election was altogether too close to disregard

that. As Labor is as good a test as any as to the intentions on that

score, I think it is a splendid thing that you were willing and that

the President-elect chose you to be his designate as Secretary of Labor.

Now my questions are directed solely to your conscience rather than

any finite details of your administration as Secretary which naturally

you have not yet undertaken, and they won't be many.

Are you acquainted personally with the body of law which you

will be administering as Secretary of Labor ?

Mr. SHULTZ. I am acquainted, I think, taking it in that spirit. I am

not prepared to be examined on all the details of all the decisions and

so on at this point, but I am acquainted with the laws, yes, sir.

Senator JAVITS. Taking it by broad categories, the laws on labormanagement relations, the laws insofar as they are applicable in the

Labor Department, with the special manpower provisions, manpower

training aspects of the antipoverty program which fall in that category, the laws relating to discrimination in employment on the ground

of age as well as on the ground of color or faith or sex, the minimum

wage laws of the United States, various aspects of safety insofar as

they lead into the Department of Labor—is there anything in those

broad basic policies now enacted into law which you could not in good

conscience administer in accordance with the letter and spirit of the

law as you understand it, as it is on our books?
Mr. SHULTZ. No, sir, not to my knowledge.

Senator JAVITS. So you find yourself able to follow the broad general

policies of the United States in all of the major aspects of your office

as administered in the Department of Labor?

Mr. SHULTZ. Yes, sir.

Senator JAvrrs. Do you have any objections in conscience to some

highly controversial—I say "in conscience" very pointedly because you

could have lots of objections in practice and in detail. We have tried.

for a long time to do something about tax credits for manpower training in the business field.

Do you have any objections in conscience which would make it impossible for you to deal with such a question objectively in what might

be the best interests of the American economy?

Mr. SHULTZ. No, sir.

Senator .TAvrrs. Similarly as to the problems of manpower as they

affect public versus private employment, in the manpower bills with

which many of us have been concerned there are provisions for lastresort employment by the Government.

Is there anything in conscience that you would find objectionable in

that regard?

Mr. SHULTZ. No, sir; not in conscience.

Senator JAVITS. I don't mind your making that point, not in conscience, because I can understand perfectly you might not agree on many

details but, generally speaking, you have no such objection.

Do you find any conscientious objection to the participation by the

private enterprise system in the major functions which relate to manpower training, the aspects of the antipoverty program which come

into the work of the Department of Labor?

Mr. SHULTZ. No, sir. I think it is vital to involve private enterprise

and other nonprofit organizations in this effort, along with Government.

Senator ,TAvrrs. Finally, do you have any objections in principle to

whatever measures might seem desirable for the purpose of dealing

with the very grave problem of work stoppages or lockouts which

bring paralysis, and we 'have faced a number here in railroads, in airlines, in public employment, and we have faced it as a Nation and also

by region.

Do you have any objections in conscience to the fundamental need

of our country to operate by whatever measures have to be adopted

toward that end?

Mr. SHULTZ. No, sir.

Senator JAvrrs. Thank you, sir.

The CHAIRMAN. Mr. Williams.

Senator WILLTAxs. Thank you, sir. I certainly join all members in

congratulating you in your most important and most deserved position

as chairman of this committee. I will offer all the support I can.

I have had the opportunity—I am sure all members did—to have a

discussion with Mr. Shultz in my office. I certainly enjoyed it. It was

most informative. I can say I have another committee conflict, too. I

understand there will be no executive, no formal approval of his nomination today, but there are mechanics that will be considered.

The CHAIRMAN. I understand the mechanics are being worked out

in all the committees along this line.
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Senator WiwAms. I just wanted to indicate at this point before

I leave, my vote by proxy for confirmation of Dr. Shultz to this high

office.

You are leaving the placid waters of California and the study

group and you are now on the firing line, as you probably well appreciate, Dr. Shultz. I have a feeling that you will be a sturdy man, a

man who is very much prepared to take on this responsibility..

I don't have any specific questions, but I have one observation..

It seems to me that this is one of the very creative and innovative

committees of the Senate. We have developed legislative ideas, programs that are now in operation and many of them within the purview

of the Labor Department.

Of course, it is our continuing responsibility, as I see it, to exercise an oversight responsibility to see how the programs are working,

to work with you to modify them where necessary, and to improve

them where they are not fully reaching the obectives that we all hope

for.

I am sure that that cooperation will come from your Department.

Mr. SHULTZ. Absolutely.

Senator WILLIAivis. - As everybody here knows, I have had a specific

assignment for some years now on the problems of farmworkers, and

some of the programs developed here, of course, will be within your

area of responsibility.

On one of the recruitment methods of farmworkers—through crew

leaders—legislated a registration program. I will say it has not been

working as well as we had hoped. This is an area that we will want

to explore with the Department.

Again, I know you will be ready to explore, with us, how we can

improve that.

While in manpower training, emphasis has been put on urban areas,

there is now a promising beginning in the training of rural people

for jobs.

This is another area that we will want to explore with you. With

that we can congratulate ourselves that the President-elect named you.

Mr. SHULTZ. Thank you, sir.

The CHAIRMAN. Senator Williams, thank you for your remarks.

Perhaps I could clarify one matter.

At the conclusion of this hearing the committee is not in a position

to pass upon this proposed nomination because the nomination cannot be made until after the new President is inaugurated, but we did

contemplate an executive session after this to take the preliminary

action that will enable us to act with great fluidity assuming that the nominee receives the approval of the committee after the new President has been sworn in.

We do anticipate an executive session after, but not to confirm a

man not nominated but for other action.

Mr. SHULTZ. Thank you.

The CHAIRMAN. Senator Prouty.

Senator PRoury. Dean Schultz, I have been most impressed with

the favorable comments concerning your nomination which have been

made by leaders of management and industry.

I hope that bodes well for the future, that you are goina

b

to con- tinue to command the respect of both these groups, and that you will
12

be able to persuade them that what is in the national interest is

also going to be very meaningful and important to them.

I believe that you will do a very outstanding job in that respect.

I have had an opportunity to visit with you at some length. I think

I know some of your ideas and your general philosophy. From what

I have heard thus far, I find myself pretty much in substantial agreement with your views.

There may be differences on various issues from time to time. I

have not been happy with many past policies and administrative

practices of the Department of Labor. I have a very extensive memorandum here dealing with some of them.

I am not going to take time to read it nor ask you any questions

with respect to it at this time. However, after you have assumed your

position as Secretary of Labor, I shall send you a rather detailed

memorandum of certain changes which I think might well be made

in your Department, and I hope that your staff members will give

it serious consideration and look into these questions in some detail.

I am very happy to assure you of my support in confirming your

nomination. I think you are going to do an outstanding job as the

next Secretary of Labor. Thank you.

Mr. SHULTZ. Thank you, sir. I look forward to receiving your

memorandum.

The CHAIRMAN. Thank you, Senator Prouty.

Senator Kennedy.

Senator KENNEDY. Mr. Chairman, I too, want to echo the sentiments

which were expressed by a number of my senior colleagues on this committee in saying how we look forward to working with you as our

new chairman.

We know very well that there is a large void left by the retirement of Senator Hill. All of us are aware that the system of seniority

works in this as in any other Senate committee. But I personally feel that under any system which would be devised by the membership

of this committee or any other committee, whether it was by vote

of members of the committee or by seniority, Senator Yarborough

would have been elected—and overwhelmingly so—as chairman of this committee. He has the deep respect of the members.

I want to say how much I look forward to his leadership in so many

of the fields with which this committee concerns itself for the Com- mittee on Labor and Public Welfare touches in a very dramatic way,

the life and well-being of the people of our Nation as perhaps no other committee in the Senate does.

I wanted to express my own deep feeling of respect for Senator Yarborough's leadership and his willingness to work in every way possible

to see that this committee is as effective as I know it can be.

I wish also to extend a warm word of welcome to the designee. I

think the selections and nominations have truly been outstanding. I

think all of us are indeed fortunate to have the recommendation before

us.

The background and experience and interest of the designee in the

fields and areas in which he will have responsibility are truly remarkable, and I am looking forward to working with him in the variety of

responsibilities which I have within this committee.

I would be interested in just some general responses to some of the

areas with which I am concerned, Mr. Schultz.
13

One of them would be in the following area: I think all of us in the

period of the last day or so have seen the indication by President

Johnson and the suggested support of President-elect Nixon that the

surchage will remain in effect. There are already in existence a number

of cooling-off mechanisms for the economy for the next period of

years, and I think many of us are aware that the history of a period

such as this will mean that there probably will be some increase in

unemployment.

This is not necessarily so, but I think the best judgments and the

best economic forecasts would perhaps see this. If there were to be

some increase in unemployment the areas that will be hit hardest, according to the best information that we have available, will be the

hard-core areas in many of our urban centers—particularly among

young people and minority groups.

I know you have thought about this and I am interested in how you

feel you might be able to meet this sort of challenge.

Do you think there really is a possibility for this development and if

there is, how do you feel you are going to be best equipped to meet this

challenge?

Mr. SCHULTZ. I think it is important in the development of economic policy to have the problem of unemployment very firmly in

mind and to go about the process of cooling off, to use your phrase, or

getting better control of inflation and the price level carefully so that

as best we can we don't have accompanying that any major increase in

unemployment.

Now I think that in the programs in the manpower area the Department of Labor is in part responsible to provide a vehicle for somewhat

moderating the impact of unemployment.

We do have programs that are directed toward hard-core unemployment. We should make an effort to deal with certain categories

of unemployment directly through this kind of program and thereby

take care of some of the need to pump up the economy to deal with

that kind of unemployment and to take care of that need somewhat.

I think these programs may also be used to deal with skill shortages

and therefore to take some of the pressure off the tendency in the labor

market to produce large increases in wages and accompanying increases in prices.

So I think there are some things that we can do in the Labor Department that I suppose in economist terms he would say would change

the terms of trade between dealing with inflation and dealing with

unemployment and try to develop our economic policy with great concern that we don't have any major increase in unemployment.

Senator KENNEDY. What do you consider to be an acceptable level

of unemployment?

Mr. SHULTZ. Well, I believe that we should try to keep unemployment going down and get it as low as we can.

I am not trying to be elusive in saying that but let me give you an

example. The unemployment rate now is in the neighborhood of 31/2

percent, I believe it was 3.3 percent from last month's statistics.

At the same time, the unemployment rate among black teenagers is

in the neighborhood of 25 percent. Now I should think that we ought

to work very hard to see if we can't get that 25 percent number down.

It will be reflected in the overall rate but nevertheless that is much
14

too high a figure. It is a baffling figure in some ways because it was

approximately that number some 8 or 10 years ago.

We have had a great surge of prosperity in the intervening period

but there it is, still staying at this high rate.

So it seems to me that using manpower programs and other devices

we should be working hard to try to get that down and in the process

get a better control of the unemployment problem.

Senator KENNEDY. We have also had the infusion of many additional

manpower training programs, yet as you point out that figure has

remained fairly static.

I am wondering whether you have any additional kinds of ideas

which you are able to describe here in a general way today about how

you feel we can best meet what I think is recognized by your own statement as one of the most difficult problems which we face—that is the

hardcore unemployment among youth.

Also, I come from a part of the country that has a number of older

workers whose skills have gone by. It is extremely difficult to get

training programs for the textile and shoe people and the rest.

Directing your attention now to the problems of the hard-core youth

and to the training programs and these manpower programs, do you

think that just by consolidating and coordinating them we can start

cutting down that high unemployment figure?

What ideas do you bring to meeting this problem other than continuation of the programs that we have?

Mr. SHULTZ. Consolidation, better organization, should be helpful.

That is something that we would pursue vigorously.

The interest of private industry which has been mentioned here has

really just been focused in the last year or so on this problem.

I would expect and try to help bring about a greater and greater

involvement and interest there. I think that is important.

It is tremendously important to look at this not simply in terms of

the manpower program but in terms of the whole process of education,

formal education in these areas, to see if we can't produce a better educated person coming into the labor force.

I think these are the sorts of things that we would look at. I say this

without feeling that I have any magic formula for dealing with the

problem that has persisted and seems to be a very difficult one.

But it is one that I think we should work on along the lines I have

mentioned.

Senator KENNEDY. One of the programs which I think has met with

considerable success—and which I know Senator Javits has been very

instrumental in developing with Senator Robert Kennedy—was the

Bedford-Stuyvesant area in New York. A number of industries that

have gone in there, most dramatically IBM, have opened up great

opportunities for a number of hard-core unemployed youth as well as

the general unemployed.

One of the interesting facts which I learned in my visit up there

recently is that IBM feels that their branch here could be competitive.

They put this in 2 years ago, and next year they feel it will be competitive with IBM plants in other parts of the country. The rate of

attendance and the rate of production are all now moving in a way

which is competitive with other IBM facilities. As I understand it, they

expect to go up from an employment of 140. They have 1,400 applica-
15

tions waiting to go into this industry, which I think reflects what I

know you have expressed briefly this morning and at other times in

publications, that there is a very important role for private enterprise

in meeting this responsibility.

I am just wondering whether you have developed any thoughts along

that line?

Mr. SHULTZ. I think your comment about the competitiveness of

the IBM plant is a heartening one. I would like to pick up the two

numbers you mentioned, 140 I think you said employed and 1,400 applications and make a comment about that because many people take

two numbers like that and they say, "What is the use of IBM going in

there? You see, they have not solved the problem.

"They only have solved some small proportion of it and, therefore,

we should not be so excited about this or we should not be looking

at this because it has not solved the problem."

In my view, that is a very shortsighted kind of statement because

it seems to me that we have to recognize that there is no single way

to solve a problem like this.

It can only be solved by a lot of different things that we do, some

coming from the demand side of the labor market, some coming from

the supply side

'

some involving jobs in other areas.

It is through a multiplicity of things that we will get somewhere,,

not by looking for the one single thing that is going to solve all the

problems for us.

Senator KENNEDY. I know that there are others who have some

comments and questions.

I would just like to raise a few other areas which I am very much

interested in and which I know you have thought about. One is the

problem of the older worker who because of the transition and movement of technology finds himself unemployed.

This is, of course, one of the problems that we face in New England

in the textile and shoe industries. For training of these workers has

not been effective.

This is one of the older industrial parts of our country. I know

that you will be thinking about ideas in this area, and I want you

to know that it is a matter of great interest to many of us.

Also, I think all of us on this committee are aware of the multiplicity of training programs that exist in all parts of our Government.

I think that there is a real need for having a comprehensive manpower program, and I know you have made statements and comments

on that.

Do you wish to make any brief observation on this point?

Mr. SHULTZ. I agree with that need. Exactly how to implement it

is something that we will be working on very hard in the Department

of Labor if I am confirmed for that post.

We would hope to bring forward within our house a well-organized

way of administering our program and to develop ways of working

well with other departments and agencies.

There are aspects of it that do call for changes in statutes, I believe, and at that time we will be before you and no doubt you will

be making suggestions, too.

Senator KENNEDY. Finally, Mr. Shultz, I have been terribly interested in the form of our draft laws. One of the areas within our draft
16

system provides exemptions of critical skills which are designated

by the Labor Department.

I certainly hope that you will get a review of what is really con- sidered vital in the national interest so that opportunities for obviously

necessary skills for the national interest are protected. But I hope also that you will draw about as tight a line as you feel is possible in that area so that this does not serve as any loophole.

I think a variety of different changes have to be made to make the draft more equitable. We have that responsibility here but to the

extent that in an administrative way you view that situation I would certainly appreciate it.

Thank you, Mr. Chairman.

The CHAIRMAN. Senator, will you take over the chairmanship temporarily? We lack one member of having a quorum in the Post Office and Civil Service Committee. I will go up to make a quorum. Senator KENNEDY (presiding). Senator Murphy.

Senator MURPHY. Thank you, Mr. Chairman.

I would like to join in the remarks of my colleagues in congratulating

Senator Yarborough. He is, as all the gentlemen present have said,

a serious, hard-working member of this committee and deserves the chairmanship.

We will miss Senator Hill greatly. I am sure if there is anybody in this hearing to fill his shoes, Senator Yarborough is the one. I also would like to congratulate my other colleagues in welcoming

new members to this committee. I think you will find this a most interesting and rewarding experience. Some of the things done on. this committee since I have served in the Congress have been of tre- mendous importance to the general welfare and future health of

our Nation.

I am pleased at the areas covered by the remarks and questions of

my colleague from New York, the areas covered by Senator Kennedy,

my esteemed friend from Massachusetts.

We have been plagued in the last several years with a higher rate of work stoppage than I can ever remember and I have been interested in the labor movement for over 40 years.

I am a member of organized labor that long. I would hope that

you might find some better way to deal with labor disputes than the old-fashioned strike, picket line, and the use of force. It would seem to me that we should advance beyond that. I would hope, sir, that in your job as Secretary you will join with me in our efforts to explore this matter.

I.am pleased to see in your background you have had great ex- perience in arbitration, arbitration panels. It would seem to me that this experience will stand you in tremendous good stead. Collective bargaining is proper and necessary.

As to the work stoppages, it seems to me I can remember when I used to be scared to death that I would lose a day's or two days work, that I could not afford to be out of work that long.

I wonder if you would care to remark on your feelings on these matters.

Mr. SHULTZ. I think it is always well to work hard to make collective bargaining work, to have settlements without strikes that are also good settlements.
17

You remarked on my experience as arbitrator. I am proud of that

but I suppose I would have to say that I got my most satisfaction in

this field from the successful efforts at mediation or even before that in

what help I have been able to give to the parties in improving their

own situations so that they can work out things by themselves without

a mediator.

So I think this is the spirit in which I would approach that question

rather than the spirit of arbitration.

I would look forward to working with this committee on that range

of issues which I recognize as being very important not only in the

private sector but in the public sector.

Senator MURPHY. Another thing has disturbed me since I have been

on the committee. At times I have felt that this committee and the

Department of Labor were in a contest somehow or other rather than

working in complete cooperation.

I have the feeling that under the new Secretary that that will no

longer exist.

On the matter of statistics, I have been concerned over the dependability of figures. I am pleased to hear you say that you don't accept

that three percent unemployment figure. I never have. I don't know

why it should be 3 percent, why it can't be 2 percent, maybe one day

down to only those who are unable to work.

I am glad to see that this figure, which has been accepted so easily

for far too long, you do not accept.

Now the matter of statistics is terribly important. I hope that you

will not only have the statistical area of the Department working

better possibly than it has in the past but that the statistics will be

available to us on the committee.

So often some of the areas that we worked in it was difficult to get

the figures. Some figures that I received from the Department I just

knew were not right.

As a matter of fact, on two occasions the former Secretary spoke

with me and apologized for questioning my figures against his and

admitted mine were right and his were wrong.

This is an area that is extremely important to this Committee because we have to base our deliberations on the figures supplied to us

by the Department.

I often wonder if you have considered the possibility sometime in

the future of one possible solution that I have put up for 20 years, of

labor courts, a series of labor courts which might alleviate a great deal

of the constructive and waste of work stoppage that takes place.

Have you given any thought to this sort of development?

Mr. SHULTZ. I have. We in effect have a private system that I suppose you could call "labor courts" if you want to, that works quite well

on the whole under which the terms of the contract are typically

grieved up to a certain level and then arbitrated, with the whole process under the sponsorship of the union and management involved and

it does have a determined input through arbitration which the parties

accept. It seems to me on the whole that is a better system for handling

private disputes than a publicly imposed one.

Indeed, I think the contrast between this private system of adjudication with the public one that exists under the Railway Labor Act is

very sharp and constructive.
18

Were it not for the fact that I would like to see the situation under

the Railway Labor Act improved I would say it would be good to keep

it there just so that the contrast can be made.

But I do think that we have developed a very effective system in

private industry in collective bargaining for adjudicating disputes

under contract.

When it comes to disputes over the terms of new contracts, there I

guess I would h very slow about a labor court system or system of

arbitration of these disputes in any form.

I lean very heavily on the free system of collective bargaining that

we have.

Senator MURPHY. I have no more remarks, no questions. I think

from your background of experience you are certainly well-fitted for

the very important and very difficult position that I hope you will

attain.

I will enthusiastically support the nomination.

Thank you very much, Mr. Chairman.

Senator KENNEDY. Senator Mondale.

Senator MONDALE. Thank you very much.

I wish to join and associate myself with the remarks of Senator

Kennedy with reference to our new chairman. There is no committee

in the Senate which has a broader responsibility in dealing with the

human problems of this country than this Committee.

I know of no one who has been more fully dedicated to the solution

of these problems than Senator Yarborough. I consider myself privileged to serve on the Committee with him.

Dr. Shultz, I wish to express publicly what I mentioned to you

earlier, that is my gratitude and appreciation to the President-elect for

nominating you for Secretary of Labor. I think in doing so he has not

only selected a person with a rich background but one who has shown

an interest over the years in trying to meet the problems of manpower

and other human problems which so desperately need solution these

days.

Senator Kennedy referred to the effort in Bedford-Stuyvesant and

the IBM plant. I had the privilege of going through that BedfordStuyvesant area and visiting that plant.

I thought the IBM plant was the most impressive single effort

underway in the employment sector. As a matter of fact, some of the

other efforts of a pioneering nature were shaky and I have some questions whether some of the new entrepreneurial efforts are going to

succeed.

Senator JAVITS. Will the Senator yield at that point?

Senator MONDALE. Yes.

Senator JAVITS. I think the force of the numbers must be explained

by three facts. One is the real difficulty of timelag; it is very hard to

get a plant started.

Secondly, the fact that quite a good deal of employment is taking

place in the self-improvement phase; for example, we are renovating

an enormous building there which will be used; and, third, simultaneously in conjunction with the efforts to locate plans there is also

an enormous training operation going on.

Especially I like best the one that involves the Reverend Leon Sullivan's plant in Philadelphia.
So, altogether I would say that we probably involve about 5,000 in

every phase, but even that when you take a community of 300,000 or

400,000 is not doing very much for all the effort and all the time and

all the money and all the high-class assistance we have put in it.

Senator MONDALE. That was basically my point. I think the Bedfor-Stuyvesant.effort is one of the most energetic efforts in the country.

Senator JAVITS. It is one of the most original. I think Senator Robert Kennedy really showed what you can do with a Senate seat.

A number of us tried to do that in the area. He certainly showed us

in this very highly troubled poverty area.

Senator MONDALE. My point is that if in a community, if my figures

are correct, of some 425,000, this is all we can accomplish at least in

this short interval, surely the distance that we must go yet in our Federal programs and private sector and other sectors to bring hope and

opportunity to the thousands and millions that are deprived, it is a

long way, indeed.

fthink one of the reasons for this, it is my impression and I would

like you to comment on it, is that most of the jobs in this country are

now being created outside the center cores of our American cities.

They are fleeing the cities and they are going, as Secretary Weaver

once put it, horizontally. They are moving into the suburbs, they are

going in these vast one-story efficient industrial centers.

It is to the suburbs and to the outlying areas where the new jobs,

semiskill jobs are going. The Negroes, the unskilled in the American

cities remain, partly because they can't afford to move, partly because

they are not skilled, and I think tragically, partly because they are

colored.

• Is it your impression that this observation is essentially correct and,

if so, what do you envisage might be helpful?

Mr. SHULTZ. I think it is correct. The statistics are quite striking.

The CHAIRMAN. Pardon me. While we still have a physical quorum

here I desire to know the desires of the committee.

I hope we can have a unanimous agreement now that the committee can meet in executive session on the limited purpose only of confirmation or rejection of the nominee without a physical quorum being

present.

May we have unanimous consent of both sides that we can pass

on this matter even though a physical quorum will not be present

hereafter on this one limited matter? We do have a physical quorum

at this time.

I think we have to have such an agreement on under the rules while

we have a physical quorum present.

Senator JAvrrs. Mr. Chairman, I move that the Chair be permitted

to poll the committee for this limited purpose.

The CHAIRMAN. Is there objection?

Hearing none, the motion is carried and for this limited purpose

only, for the confirmation of the nominee.

Before the Senator from Massachusetts leaves, I want to say I

deeply appreciate the kind remarks he made about my chairmanship.

I am cognizant of the fact I am chairman by seniority. However,

since the national news commentators have described my State, and

quite accurately, as a politically volatile State since I have been

elected three times to this office, I feel as the late Senator Francis
20

Greene, of Rhode Island, felt. He was being interviewed in a nationwide documentary because he was 92 years of age, the oldest man ever

to serve in the Senate, with the prestige of being Chairman of the

Foreign Relations Committee, and he had a great record as Governor

of Rhode Island.

After they reviewed a lot of this record, they said, "Senator, what

do you think is the greatest thing you have ever accomplished in life?"

He sat there and reflected. Apparently it was one of the questions

they throw at you on television out of the blue. He reflected for a

minute and said, "Getting elected."

Senator JAvrrs. May I have the indulgence of the committee to make

a brief presentation to the chairman.

We have all spoken glowingly of his service and our pleasure at his

becoming chairman. I would like to present to him the traditional

gavel presented by the ranking minority member to the new chairman

of the committee with great pride and great pleasure.

The CHAIRMAN. Thank you very much, Senator Javits. Thank you

very much. Let us unveil it. There it is. I will pass the other one over

and use this one with pleasure, and I hope it never hits the wood in

anger.

Thank you very much for your kindness.

The Senator from Minnesota. Pardon the interruption.

Senator MONDALE. Dr. Shultz, on the same day, as I recall, that

the IBM plant was announced to provide 200, potentially 400 jobs

at Bedford-Stuyvesant, with little notice IBM announced a new plant in the suburbs providing employment for 1,500.

I am not critical of IBM because I think they showed statesman- ship in doing what they have done and they deserve our apprecia- tion for doing it, but I think this represents a national pattern by which jobs are fleeing central city.

New jobs that are created are being created in the suburbs and in remote areas far distant from the unskilled and particularly those suffering from racial discrimination in the core cities.

I was wondering if you could comment on what programs you think

might help in this area.

Mr. SHTILTZ. First as to the fact, the statistics I think are quite

dramatic in bearing that out. It is spite clear in city after city across

the country that the expansion of jobs has taken place largely in the

so-called outer ring and not in the central city.

The ways in which it seems to me one tries to work at that are, first of all, to see if you can't get more employers in the central city,

such as IBM, for example.

You have to recognize, however

'

that firms are basically going to

establish their plants in places that they think are most economic and

in general the economy is going to work that way.

I think that is the proper way for the economy to operate. Therefore, we have to ask ourselves how are we going to help people have

those new jobs. And here it seems to me the two key factors are on

the one hand the available transportation and public transportation

systems.

People now have to make two, three, four shifts in public transportation to get out to a plant from the central city.
21

I might say what I note about the operation of labor markets and

employer standards, that one of the things you will find among employers is that they will say, "Well, we want to know how difficult

it is going to be for you to get to our place of work because we know

if it is too difficult you are probably not going to last very long, you

are going to find that too hard."

I think our transportation system is part of the problem and also

part of it is the availability of living accommodations somewhere near

where these places of employment are.

Senator MONDALE. Do you see a vigorous enforcement of fair housing

laws as part of this effort?

Mr. SHULTZ. Yes, I guess I would. I think I know of these things,

that whether we are talking about fair housing or equal employment

opportunity it is well to try to work in a mediating fashion because

basically you have to bring about a situation that people accept. But

at the same time I think there is a role here for legislation and for

looking at it from that side, too, making these two sides of the story

work together.

Senator MONDALE. One of the proposals that have been made repeatedly around here that appeals to me is the so-called Clark proposal for public service employment which was cosponsored in a modified form by Senator Prouty and by many members of this

committee.

I noted 2 days ago that the Gallup poll showed an overwhelming

sentiment of the Americans strongly in support of the opportunityoriented legislation such as employment.

I have the feeling that this is the place where maybe the Congress

is behind the American public, they see the problem perhaps more

clearly than the Congress does.

Would you comment if you can about your views on some kind of

public service employment program and any other observation you

care to make in this field?

That is my last question, Mr. Chairman.

Mr. SHULTZ. If that is your last question it is quite a question, I

must say.

I think the way to get at the poverty problems for those who can

work is through job opportunities rather than through the provision

of income without work.

Senator MONDALE. You are now talking about people able to work ?

Mr. SHULTZ. That is right.

Now beyond that there is this concept of the Government as employer of last resort.

Senator MONDALE. I did not say that.

The Clark proposal I think was a halfway-house proposal. No Federal employment program and the Federal Government last-resort

program.

This is a program to provide public service jobs as I recall for maybe a million employees to work in municipal governments and other

agencies providing public service.

Mr. Simurz. I think in this area that it is important for all employing units in the economy to be, let us say, doing their fair share

of work with the problem.
22

It seems to me that it is well for Government not only to try to stimulate efforts in this direction by private industry but undertake them

itself in its various categories.

So I think to that extent I support this sort of program. I am dubious, however, about a program that starts with a flat guarantee that

everybody will be taken onto a Government payroll somehow or other

because I think that may tend to undermine the incentive to work in

regular productive organizations.

It is in the regular line of productive organization that we ought to

be looking for employment.

Senator MONDALE. Thank you, Dr. Shultz.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

Senator Schweiker.

Senator SCHWEIKER. Thank you very much, Mr. Chairman.

I want to say that T congratulate the chairman, too, on the honors

that he has achieved in his position. I am pleased to serve on this committee as a new member. I have had the opportunity to question Dean

Shultz on several occasions when we met informally and I think it is

rather remarkable that he has been so well accepted by the business and

labor communities.

I think this is testimony to his own background and approach. I just

would like to say that I hope the moneymoon lasts for a long time.

I must confess to my colleagues, however, that I have already pledged

my vote to Dean Shultz since he bears my middle name.

Mr. SHULTZ. I bear yours.

Senator SCHWEIKER. However, in spite of this obvious burden and

my own conflict of interest, I know you will make a good Cabinet

Secretary.

Mr. SHULTZ. Thank you, sir.

The CHAIRMAN. Senator Eagleton.

Senator EAGLETON. Dr. Shultz, I think every Senator has sort of a

"hit parade" of sensitive and touchy questions, especially in the labor

area. So I would like to ask you two questions. They look simple but I

presume the answers are a bit complex.

First, I would like to hear from you with respect to your observations on what might be called national emergency strikes. Secretary

Wirtz, I think at one time, I don't recall the year, mentioned that he

would send up to Congress his recommendations as to legislation that

should be enacted in the area of national emergency strikes.

Frankly, I don't recall that the message ever got to Capitol Hill.

Maybe it did but I don't recall it. But be that as it may, could you

give us your approach as the Secretary of Labor in this very important

and volatile area.

Mr. Siltrurz. I would approach that question very cautiously and

to be careful about recommending legislation that has a logical appeal

because of the closure that it seems to offer, but which may have practical undesirable consequences.

I think the temptation that people have is to say here is the situation, here is the strike that is causing us a great deal of difficulty, and

particularly when you have a type of situation, as in the east coast

waterfront, that just seems to be perpetually in trouble, one says now

how can we deal with that? It must be that we have some method that

gives logical closure on the situation.
23

As soon as you look for logical closure you get yourself in some

sort of compulsory arbitration, seizure or some version of that.

The problem, it seems to me then, is that once you have a procedure like that in being it tends to draw the use of it, and people start

to plan their bargaining strategy in terms of the procedure that you

have set up.

So if you are not careful I think you will have legislated something

directed toward a troublesome situation that may wind up doing damage over in other areas that have been working perfectly well but

which now readjust themselves in the light of this new legislative

possibility.

So it is for that reason that I tend to be very cautious about suggesting any major changes in the situation that we now have.

I am not sayinff

''

that improvements can't be made or at some point

we should not be talking about them. But I would say that it seems

to me we want to be very cautious about putting anything into being

that will destroy collective bargaining where it is working well; and

in most of the collective bargaining situations in this country it is

working well by virtue of trying to address ourselves to some par.

ticular difficult situation.

I have written on this subject quite a lot, I am afraid, and some

people can look up various things I have said and thought about.

I do have views on the subject but I put them in this general framework that I have mentioned.

Senator EAGLETON. Doctor, my second and last question in the sensitive areas of labor endeavor concerns itself with what might be called

public employee strikes, running the whole gamut of public employment, police, firemen, garbage collectors, schoolteachers

'

and so forth.

What role, if any, do you envision that the Federal Government,

either through legislation or the administration by the Department of

Labor, should play in this area which is, one might say, an expanding

area of public concern?

Mr. SHULTZ. I think that is a subject that should command very

high priority, of course, studying and developing ideas.

I don't feel that I would want to comment in this area beyond saying that much of the problem can be traced to the issues of recognition and I suppose one of the things that we need to work out is

procedures for determining what kind of bargaining agent, if any,

public employees want and see if we can't develop ways to resolve

that issue in an orderly fashion.

I think also that there are many novel features to the idea of collective bargaining in public employees that involve difficulties with

the whole budgeting process as it is done in public life.

It is not as though a public employer sits down with a union and

and can agree instantaneously to changes. The public employer who

is doing the bargaining is operating within the framework of statutes

and the legislation passed by some governing body and he is controlled by that, so there is an articulation problem there.

Beyond that I think in many of these cases, at least as I have

observed them, the very newness of collective bargaining has caught

people unprepared and I would expect over a period of time as people

learn more about it, as the quality of representation and the quality

of management, so to speak, in the labor relations area in public employment improves, that we will have less strife than we have seen.
24

I certainly deplore strikes of public employees and hope that we

can make some constructive contribution to the more orderly and

peaceful procedure in this area.

I think it is a matter of great importance.

Senator EAGLETON. Thank you, Doctor.

Thank you, Mr. Chairman.

The CHAIRMAN. Senator Dominick.

Senator DOMINICK. Thank you, Mr. Chairman.

I just want to welcome Mr. Shultz to the committee. I am positive

that we are going to have a very fine relationship.

I have heard nothing but good comments on your background,

your record, your balance, and so on. So I want to say that I have

no intention of asking questions which sound or even appear to be in the slightest degree critical.

But I do want to take this opportunity to ask you whether you

would envisage a study of some of the mechanics of the labor laws

now in existence in order to determine if they should be revised.

The issue of secret ballots for elections is one example. We asked Mr.

McCulloch about this when he was up here for hearings on his renomination as Chairman of the National Labor Relations Board.

Generally speaking, it seems to me that perhaps some study should

be made of possible revisions in the law and recommendations should

come from the Labor Department.

Do you have any thought on this at all?

Mr. SIII7LTZ. I think it is important in the Labor Department for

us to be studying and evaluating the full range of the programs and

statutes that we either administer or have an interest in.

In the case of the National Labor Relations Act, that is administered

by the Board and not by the Department. Obviously we have an interest in it in the Department of Labor. I think that across all these

areas we should be developing our capacity to do effective research

on what is going on and be in a position to evaluate the impact.

One of the things that is quite striking to a person from academic life is to see how little research, in some respects anyway, there is on the real impact of certain areas of legislation in a field that is a very tense

one and gets lots of attention.

For example, there are lots of aspects of the law that require under certain circumstances that an employer or union bargain in good faith

or requires an employer to put a person back to work under certain circumstances, and so on, and there is very little research on such ques- tions as, well, what happens after the employer is required to bargain in good faith?

What difference does it make in the situation? Or does it make a

difference in the structure of how that order comes in as to his behavior and so on.

I think this kind of research is something that we should be doing. I don't say that we necessarily should be doing it all right in the De- partment.

Perhaps following the same line that we talked about in the manpower field we should try to encourage more of it being done outside the Department and by people in universities and elsewhere.

I do support the idea of research and evaluation of the Department's

programs and things that are of concern to it.
25

Senator DOMINICK. Thank you, Mr. Shultz.

Again I want to welcome you to the committee. Yours is a very fine

nomination.

Mr. SHULTZ. Thank you, sir.

The CHAIRMAN. Senator Bellmon.

Senator BELLMON. Thank you, Mr. Chairman.

I want to express my appreciation for the kind remarks you have

addressed in my direction earlier and I will say I look forward with

great anticipation to working with our distinguished chairman of this

committee.

I want to preface my remarks by saying I once served as chief executive of a State and I feel very strongly that our President has the

right to choose his own Cabinet. I want you to know that my questions

are intended to be friendly and that I certainly have no intention of

not supporting this nomination.

I have talked to Dr. Shultz and I am impressed with his objectivity

and knowledge in this field.

There are a couple of questions I would like to mention to get your

reaction.

One is the fact that we see very serious problems in our cities at

the present time, problems partly related to the fact that the income

of many of our urban dwellers is inadequae and, in my opinion, this

is related largely to the fact that we have had a major revolution in

agriculture which has caused depopulation of many of our areas. Many

•of these people come to cities not equipped to cope with the requirements of an industrial society.

This revolution is still going on. I am from Oklahoma, we are still

losing rural population at a rapid rate. I hope in the work that you

do as Secretary of Labor that you will not overlook the fact that we

still have not only unemployment but serious underemployment in the

rural areas and that if this problem can be dealt with in our farming

communities and our small towns, it would help reduce the tension in

the urban centers.

I hope you will not completely confine your efforts to the cities where

the problems are already serious but look beyond this to the cause.

I am wondering if you have given any thought to the needs of the

rural areas in helping to develop better job skills and perhaps job

opportunities.

Mr. SHITurz. Well, I share your feeling that part of the solution to

the problem of the cities lies in the rural areas and in providing good

education there and providing a way of life there that makes people

want to continue to live in those areas.

I agree with that aspect of your comments.

I might just throw in as a notion that it is a pleasure for me to note

that the other person from the universities nominated for a position

in the Cabinet happens to be the Secretary of Agriculture. So maybe

the university people can get together on that question.

Senator BELLMON. Along with this same line of reasoning probably

the most serious unemployment in our Nation at the present time exists

among our American Indians.

Here is an area where a great deal of good could be done by a well

thought out and administered program.
26

I again would like to suggest to our future Secretary that this

particular area should be given very careful consideration and I hope

you will do this.

One other problem I would like to bring up or question I would like

to ask is this: You mentioned, and I believe Senator Kennedy brought

out, the fact that there is very serious unemployment among our black

teenagers.

I think many of you have noticed as I have that it is very difficult for

members of the Negro race to break into some of our trade unions.

There is obviously quite a serious problem of de facto segregation at

this level.

I know that the Department of Labor has some administrative authority in this field which has not been fully utilized in the past to help

assure that discrimination is brought to an end.

I am wondering if you as Secretary of Labor would be willing to

use the administrative authority you have to help solve this problem?

Mr. SHULTZ. I certainly will. At the same time, I think it is very

important to try to work constructively with the trade union groups

in developing their acceptance of this.

I say that, knowing that in many instances, it may be necessary to

try to bring some force of law to the situation. But again, I think on

all these matters the more we can accomplish by the mediation approach of persuasion and acceptance, the better off we are going to

be in the long run because it is only when people accept these things

that they really do work well.

Senator BELLMON. Mr. Chairman, I would like to say that I need

to go to another committee meeting and if I can be excused I would

like to express my support for Dr. Shultz.

The CHAIRMAN. Thankyou, Senator Bellmon.

We have had the unanimous-consent motion offered by the Senator

from New York and voted on and passed unanimously while we did

have a physical majority here agreeing that at the proper time the

committee can be polled on this matter of the confirmation or otherwise of Dr. Shultz.

Senator MURPHY. Mr. Chairman, that unanimous consent was taken

while I was out of the chamber. Would it be possible to have my name

added as agreeing?

The CHAIRMAN. Fine. I would like the record to show that Senator

Murphy was attending the meeting. We had a physical majority

present even without him. He stepped outside the anteroom for a moment. He could have been counted technically but we actually had a

physical majority -present. But you will be counted as having been

present and approving.

Are there any other questions by any member of the committee?

Senator PRourrY. Mr. Chairman. I would like to underline and reemphasize what Senator Bellmon has just stated with respect to the

problems in the rural areas.

I think a lot of the migration to the cities has been because jobs

have not been available in rural areas. No priority has been given to

training rural residents who have no skills, as has been done in our

large urban areas, also, higher welfare payments may have attracted

a great many individuals to urban areas.
27

I think it is most important not only that these people be trained,

but that we find ways and means of attracting industry into rural areas

so that they can provide for themselves.

If adequate training and employment apportunities are provided

in rural areas

'

people will stay there, and this will do a great deal, in

my judgment, to solve the basic problem with which we are now

confronted in our major cities.

I want to reemphasize this point, because I think it is most important. If we had stressed this policy more over the past several years,

I think the urban problems would be much easier of solution than

seems to be the case at present.

I certainly agree with Senator Dominick in expressing the hope that

you will give great thought to this approach to the overall problem.

The CHAIRMAN. Mr. Secretary, I associate myself with the remarks

of the Senator from Oklahoma and the Senator from Vermont.

My State has the largest number of family-operated farms of any

State in the Union. This is a matter of vital concern to us that of

254 counties a majority of those countries lost population from 1940

to 1950, the majority of them lost population again, not always the

same counties but the majority lost population from 1950 to 1960.

I believe a year ago, the same two decades, that a majority of the

more than 3,000 counties and parishes in America lost population.

This is a nationwide problem.

When we ask the people for the basic reason for loss of population,

there were no jobs for the young people, automation, mechanization

in agriculture had cut their jobs of.

So this is a matter that I think it worsens the conditions in the city

with the overcrowding of people who are not trained in the ways of

city life or the occupations that they would fill in the cities if there

were occupations there.

I want to join them in their concern with this problem and hope you

will bring your great training and knowledge and expertise to that

along with other problems.

Senator DOMINICK. Would you yield at that point?

The CHAIRMAN. I yield to the Senator from Colorado.

Mr. DOMINICK. We have had a very interesting development on

this in our own State, Mr. Shultz. We had a very large company put a

branch into a rural area, not into one of the metropolitan areas of

Colorado but in a really strictly rural area.

It has already revitalized that entire area. It seems to me that one

of the things that we should be doing is to try to work through

committees of some kind to be able to persuade industries that are

moving to decentralize out of the city area wherever they can, recognizing there are transportation problems.

But this is going_ to have an enormous effect on our economy in

northern Colorado and I suspect that a lot of other industries could do

the same if they were fully advised of the problems of entering into

the major area and the help that would be given if they enter into the

rural area.

Senator MURPHY. Will the Senator yield?

Senator DOMINICK. I will be happy to.

Senator MURPHY. I am happy to say that one of the large companies

in California now is doing manufacturing in 14 States.
28

They have done this by design in order to move into rural areas. It is

working out extremely well.

During the Christmas holidays, I had occasion to go down into

Mississippi and there were two areas that I visited there where a plant

is being put in by Lockheed from California and it has done exactly

what Senator Dominick has said. It has revitalized the entire

community.

It is creating this healthy condition in these rural areas. I think

it is possible at the Cabinet level with the Secretary of Commerce,

Secretary of Labor, realizing what great opportunities exist for this

sort of development across the country, I think it is happening and

I think it would happen a great deal faster, to a high degree, if more

industries really could understand how well it has worked out. There

are many advantages to it.

I am pleased to say that these two large companies in California

have had excellent experience in this area and they are going to expand their efforts into moving into these rural areas.

The CHAIRMAN. Thank you.

Are there any further questions?

Dr. Shultz, you have received one of the most friendly welcomes

I have seen a prospective Cabinet officer receive by a committee, I

think due to your attainment in the field of education and Government, of labor-management relations.

You served on arbitration panels for labor-management disputes in

a wide variety of industries, including electrical equipment, farm

implements, textiles, chemicals, food products, metal fabrication and

others.

You were picked as senior staff economist on the President's Council of Economic Advisers for President Eisenhower back in 1955.

The confidence that people have in you is shown by the fact that

under President Kennedy in 1961 you were consultant to the President's Advisory Committee on Labor-Management Policy; in 1965,

Chairman of President Johnson's Special Task Force, appointed by

the Secretary of Labor to review operation of the Federal-State

Employment Service.

Those are just a few of the many services you have rendered in the

field of employment of people, of labor-management, of conciliation

and mediation, and so forth.

I think your record commends you to everyone who wants to see the

most competent people we can get in public service.

I hope your relations with this committee continue to be on the

same friendly basis in the future as in the past. But I warn you if a

recommendation comes up to substitute compulsory arbitration for

free collective bargaining, you know from your long experience in

that field we will all have a donnybrook then. So I do not ask you to

express opinions.

I do not think that before a man is sworn into office we ought to

try to force him to say how he will decide something.

I once served as a judge. You don't try to make a judge say how he

will decide a case before he is sworn in.

I think you have expertise. The fact that you served in Illinois on

the Governor's commissions of various types, a member of the Governor's committee on job vacancies, for Governors of all parties, you

are familiar with the field of Government, too.
29

You realize the accuracy of the observations I have made. I am

glad that the President has nominated a man with this broad background, broad experience and not only fine educational background

but in industrial economics which is really, I think, one of the greatest

fields of knowledge that a man should possess in this world problem

of labor and employment and relationship of labor and capital in our

free-enterprise system.

If there are no comments, the Senate now being in session, I declare

the committee adjourned and I want to thank the members for the

large attendance and the good attention we have had this morning.

Thank you.

Mr. SHULTZ. Thank you, Mr. Chairman.

(Whereupon, at 12 :05 p.m. the committee adjourned.)

0