Senator, if I may at this point call attention to what I am about to put in the record as being somewhat in response to the inquiry made yesterday by the Senator from West Virginia, Senator Neely. It shows what we proposed to the carriers finally as a compromise basis of settlement. Mr. MURDOCK. Do you regard these, Mr. Robertson, as your minimum demands or your maximum demands? Mr. ROBERTSON. In money they are the minimum we make; yes, sir. Mr. MURDOCK. They are the minimum you would accept; is that right? Mr. ROBERTSON. Yes, sir. We made another proposition a little later, Mr. Murdock, but it did not involve any change in the rates of pay. It did involve setting aside for 6 months or a year further discussion of the rules. The proposition of February 6 contains an answer on the rules but does not request elimination. (The document referred to, headed "Appendix B: Rates of pay,” was marked "B. L. F. and E. Exhibit No. 6" and follows:) B. L. F. AND E. EXHIBIT No. 6 APPENDIX B: RATES OF PAY ENGINEERS, FIREMEN, HELPERS, HOSTLERS, AND HOSTLER HELPERS Yard and hostler service: Increase all rates of pay 27% cents per hour ($2.20 per day), effective as follows: 23 cents, October 1, 1950; 21⁄2 cents, January 1, 1951; 2 cents, March 1, 1951. Road service: Increase all rates of pay 16 cents per hour ($1.28 per day), effective as follows: 5 cents, October 1, 1950; 71⁄2 cents, January 1, 1951; 31⁄2 cents, March 1, 1951. 5-DAY, 40-HOUR WEEK Establish 5-day, 40-hour week in yard and hostler service, with rules to cover (rules have been submitted); present take-home pay for 48 hours to be maintained. Conversion to the 40-hour week basis, to take place July 1, 1951, for the employees on such roads as elect to convert. The same amount of increase as allowed to men in road service will be added to the yard and hostler rates on such roads as elect to adopt the 40-hour week. ESCALATOR CLAUSE Quarterly adjustment of wages on basis of cost of living index (1 point to equal 1 cent per hour), with base fixed at First adjustment to be made April 1, 1951, and quarterly thereafter. MORATORIUM Agreeable to negotiating a moratorium rule covering rates of pay, rules, and working conditions, except (1) such changes as were initiated prior to the effective date of such moratorium; (2) the right to establish, under the Railway Labor Act, the union shop and check-off; and (3) the right to seek and apply such improvements in wages, rules, and working conditions as may be permissible under Government stabilization policy. Concurrently with effective date of moratorium an annual increase, as an improvement factor, of 4 cents per hour or 32 cents per day will be added to all basic rates of pay in each class of service during the time the moratorium is in effect. EXPANSION AND CONTRACTION OF YARD SWITCHING LIMITS Recognizing the mutual interest of management and employees in encouraging the location of new industries along the lines of our railroads, it is suggested that where the expansion of switching limits is found necessary in order to provide adequate switching service for new industries, representatives of man agement and the employees should meet and agree upon the changed location of the switching limits. Should changed conditions subsequently suggest the contraction of switching limits, such contraction should not exceed in distance the extent of the expansion. INTERDIVISIONAL AND INTRADIVISIONAL RUNS The practice of establishing interdivisional and intradivisional runs has long since been recognized on many railroads, but due to varying conditions on the separate properties, the matter more properly addresses itself to the managements and committees on the individual railroads. Should any management be desirous of rearranging certain specific runs so as to permit their operation on an interdivisional or intradivisional basis, representatives of management and employees will meet and in good faith endeavor to work out an arrangement that is mutually satisfactory. MORE THAN ONE CLASS OF ROAD SERVICE With the gradual increase in the speed of freight trains since the establishment of the combination service rule many years ago, there has been considerable increase in the amount of combination service, management requiring road crews to perform various classes of service en route. This growing practice is seriously affecting basic day rules. Mutual understanding as to future application of such rules seems desirable. REORTING FOR DUTY Carriers' proposed rule would cancel all calling rules, rules governing time. employees report for duty, and fixing of the time when their compensation will begin. These rules should remain unchanged, it being understood that should management of any individual line desire to negotiate a rule affecting the calling of employees and fixing of the time when their compensation will begin, on regular scheduled passenger and/or freight trains, when such trains are running late account conditions beyond the control of management, representatives of management and the employees will meet and in good faith endeavor to agree upon such rule. COMMISSION OF EIGHT Establish a Commission of Eight composed of four railroad presidents and the chief executives of the four transportation brotherhoods to consider and decide any unsettled questions involving: 1. Establishment of interdivisional and interseniority district runs. 3. More than one class of road service. 4. Time for reporting for duty. The commission will not have jurisdiction to consider any of the above subjects unless and until the procedures available under the Railway Labor Act have been exhausted by the parties. The services of the commission will not be made available until 1 year following the signing of the agreement creating it. Mr. ROBERTSON. It may, as respects rates of pay, be divided into five parts: (1) For employees we represent in yard and hostler service, we proposed an increase in rates of pay amounting to 2712 cents, with 23 cents effective October 1, 1950, 212 cents effective January 1, 1951, and 2 cents effective March 1, 1951. (2) For employees in road service we asked for an increase in rates of pay of 16 cents per hour, with 5 cents effective October 1, 1950, with an additional 72 cents effective January 1, 1951, and an additional 32 cents effective March 1, 1951. (3) For such employees as elect to accept it, we proposed that the 40-hour week be established in yard and hostler service on July 1, 1951, take-home pay to be maintained when the workweek is reduced 81733-51- -10 and an additional increase in pay granted to keep those employees abreast of our economic developments and rising cost of living. (4) We asked that wages be adjusted upward equal to 1 cent per hour for each rise in the cost-of-living index of 1 point, the first adjustment to be made April 1, 1951. (5) We asked that there be granted to us an annual improvement factor of 4 cents per hour to be added to the basic rates of pay in each class of service. This proposal was made by the organizations in reply to a carrier proposal for a moratorium on wages, rules, and working conditions for a period of 3 years. If I may, Mr. Chairman, I would like to explain that the staggering of these increases, the 272 cents over three different periods and the 16 cents over three different periods was arrived at as a result of discussions and tentative proposals made to us by the members of the National Mediation Board in our mediation conferences. Trying to string the settlement of wages out over a period of course to us appeared to by trying to keep pace with the cost of living because by the time these periods rolled around the cost of living was up a little more. If we had the escalator clause in our agreement made effective last October, those increases would have come to us as a result. But you get the pattern from the discussion. Mr. MURDOCK. Mr. Robertson, if these demands were acceded to by the management, would you then be willing to consent to a moratorium for 3 years? Mr. ROBERTSON. If they will give us the type of moratorium that all other industries have; yes, sir. Mr. MURDOCK. With the improvement factor? Mr. ROBERTSON. Yes, sir. We have already put ourselves on record to that effect. Mr. MURDOCK. Isn't that improvement factor contained in your proposals (4) and (5) as you have just outlined them? Mr. ROBERTSON. Yes, sir; it is. Mr. MURDOCK. So if management had accepted these demands as you have outlined them here, you would then have been willing to accept the 3-year moratorium? Mr. ROBERTSON. Yes, sir. These we believe to be moderate demands which represent on the whole material concessions from our original demands. They are made in an industry which is riding a high and rising tide of prosperity-in short, the railroad industry is one which should be regarding its employees with magnanimity. I think it fitting that something be said at this point regarding the present financial position of the carriers and the immediate prospects ahead. I shall attempt to do this using as few statistics as possible. A somewhat more extensive statement of the financial position of the railways is attached to my statement as "Appendix A," showing the financial position of the carriers, and I would like here to introduce it, if you will, as our next exhibit. The CHAIRMAN. That will be marked as an exhibit. (The document headed "Appendix A, Financial Postion of the Railways," was marked "B. L. F. & E. Exhibit No. 7" and follows:) B. L. F. AND E. EXHIBIT NO. 7 APPENDIX A: FINANCIAL POSITION OF THE RAILWAYS A. FINANCIAL RESULTS OF OPERATIONS, 1950 1. Results for the calendar year 1950 Railway operating revenues of class I line-haul railways for the calendar year 1950 were $9,473,210,788, the second highest level of gross revenues in history; 1950 revenues were higher than even the peak war year 1944, and were only $200,000,000 less than the record 1948 level. Railway operating expenses were also in excess of those of any other year except 1948. However, they were more than $400,000,000 below the 1948 level. The operating ratio was 74.5, as compared with 77.3 in 1948 and 80.3 in 1949. This decline in the operating ratio to a new postwar low occurred in the first complete year of operation under the 40-hour week, demonstrating conclusively that the railways' earning powers were not disturbed by the 40-hour week cost. Net railway operating income for 1950 was $1,039,834,971, a little higher than 1948, and not far below the peak wartime years. Net income for 1950, as shown by a preliminary estimate of the Association of American Railroads, was $786,000,000, a new postwar peak, and exceeding all war years except 1942 and 1943. questionably, 1950 was one of the most profitable years in railroad history. 2. Recent monthly trends Un Figures for the calendar year, however, do not fully reflect the tremendous prosperity currently enjoyed by the carriers. The first 6 months of 1950 produced comparatively low traffic and revenue figures as compared to 1948 and the war years. But, the situation changed tremendously after the Korean crisis began. In only 1 month of the last half of 1950 were revenues below $800,000,000. October and December set new all-time record levels for gross revenues, October reaching $925,000,000, and December $928,000,000. These figures compare with $878,000,000 in October of 1948, and $806,000,000 in December of 1948. They far exceed any years prior to 1948. Had the level of revenues of the last 6 months prevailed during the first 6 months, the total gross for the year would have been very close to $10,000,000,000, an unprecedented peak level. Unlike operating revenues, railway operating expenses did not reach any new peaks during the last 6 months of 1950. In every month July through December, railway operating expenses were substantially under the figures for the same months of 1948, and in some instances were below figures for the comparable months of 1945. The operating ratio for the last 6 months of the year was 70.6, the lowest operating ratio in any peacetime year since 1916. Only the best war years of 1942, 1943, and 1944, produced lower operating ratios. Both net railway operating income and net income during the last 6 months rose well above the levels of 1948, and were also above almost all other years except 1942, which produced the highest net figures in all railway history. Had the level of activity of the last 6 months prevailed during the first 6 months, net railway operating income and net income would have approached very close to the record 1942 levels. Clearly the current financial position of the railways is magnificent, and with the continuance of the latest trends, we will have new financial records set in the near future. B. Cash position The cash and current asset position of the railways has continued to be highly satisfactory in every respect. At the end of November 1950 total current assets were $3,784,000,000. The railways had over $2,000,000,000 in cash and temporary cash investments. Although their liabilities, and particularly their tax liabil ities, were quite high, nevertheless their net current asset position was excellent. The current ratio on November 30, 1950, was 1.667, a figure somewhat below the peak postwar levels of 1946 and 1947, but well above the levels of the prosperous 1920's. This excellent current asset position has been maintained by the railways even though during the last few years they have spent more money for new equipment and for other additions and betterments than at any time in the past. The railroad plant and equipment today are in as good a condition as they ever have been. C. Future prospects There is every indication today that the present prosperity of the railways will be greatly exceeded in 1951 and in the years to follow. The Shippers Advisory Board has predicted a 161⁄2-percent increase in freight-car loadings in the first quarter of 1951 over the same period in 1950. This will mean a traffic level for 1951 at approximately the 1948 level. However, the railroads' position can be expected to improve even more as the defense program of the Government proceeds. The record of the last war indicated very clearly that the railroads profit greatly from the needs of military and naval programs. During the 3 years 1939 to 1941, the railways carried only 64.2 percent of the freight traffic of the Nation and only 9.1 percent of the passenger traffic of the Nation. However, during the years 1942 to 1945 their proportion of the freight traffic increased to 70.7 percent of the total, and the proportion of the passenger traffic increased to 29.7 percent of the total. Clearly, therefore, as the defense program gains momentum, the railways will substantially improve their position from a traffic standpoint. It should be borne in mind that the freight and passenger rate level of the railways today is well above the levels of World War II. Freight revenue per ton-mile stood at 1.32 cents in September of 1950. This compares to 0.933 cent in 1943, 0.949 cent in 1944, and 0.959 cent in 1945. If freight traffic goes back to the wartime peak levels, and present freight rates are maintained, freight revenues alone would climb to almost $10,000,000,000. To a lesser extent, a similar situation exists with respect to passenger rates. Passenger revenues per passenger-mile in September 1950 were 2.54 cents, which compares with 1.88 cents in 1943 and 1.87 cents in both 1944 and 1945. If passenger traffic returns to the World War II level, and present rates are maintained, total passenger revenues will exceed 2.4 billions of dollars. Even if no increase is granted in the rates charged by the railways for mail, express, and miscellaneous services, railway operating revenues will still exceed $13,000,000,000, far surpassing the wildest dreams of railway management. Moreover, the rates charged by the railways for freight and passenger service are certainly not excessive when they are compared to other price levels. On a 1936 base, the September 1950 index of freight revenue per ton-mile was 135.5 and the passenger revenue per passenger-mile was 138.0. On the same base, the consumers' price index stood at 180.0 as of December 1950, the wholesale price index stood at 21.0 in December, and the prices paid by farmers stood at 207.3. Thus there is no basis whatever for reducing the rates now charged by the railways, and there is every justification for continuing and even raising these rates in the years ahead. Hence it is quite apparent that the magnificent record of the railways during 1950 is likely to be far exceeded as the Nation progresses further into its gigantic defense program. Mr. ROBERTSON. The railway operating revenues of class I line-haul railways for the calendar year 1950 were well in excess of $9,000,000,000, the second highest level of gross revenues in railway history. And this result was achieved notwithstanding the fact that traffic and revenue figures for the first 6 months of 1950 were below those of 1948 and certain of the war years. The traffic and revenue situation received a considerable boost with the onset of the Korean crisis. The gross revenues for October and December 1950 reached 925 and 928 millions of dollars, respectively, thereby establishing new all-time record levels. The ratio of operating expenses to operating revenues for the year 1950 was lower than in any other year since the end of World War II. This ratio stood at 74.5 in 1950, in contrast with 80.3 in 1949, and 77.3 in 1948. Unlike operating revenues, operating expenses did not reach any new peaks in 1950. In every month of 1950 operating expenses were substantially under the figures for the same months in 1948. The figure having the greatest significance is, of course, the one revealing net income. According to preliminary estimates made by the Association of American Railroads, net income for 1950 was $786,000,000, a new postwar peak and even in excess of the profits during |