time, in order to bring a complete picture before the Congress. The highway funds are carried by both the regular appropriations and the appropriations provided for Public Works.

When the National Industrial Recovery Act became a law, it provided an appropriation of $400,000,000 for highways, to be apportioned among the States and to be used under the Federal highway legislation. A small change was made in the formula of distribution by which the population was given a slightly greater weight than had existed under previous Federal-aid legislation. No regular Federalaid appropriation had been authorized for the fiscal year 1934, so that we had only the unused balances of regular Federal aid to take up, amounting to about $15,000,000 which was available principally to six States.

The new allotment of $400,000,000 was allocated to the States on June 23, and immediately stimulated the highway work in all of them. Within the approximately 6-month period 69 percent of the entire allotment has been obligated to specific projects.

There are now 5,000 projects, including those under way by force account, under contract, and that means under construction, except in those States where it is not possible to carry on work. We have had an open winter that has permitted work to proceed so generally over the country that in place of having the normal falling off during the winter months our employment is steadily rising, and we do not anticipate that we will show any falling off for any month since the new program began until the peak is reached next July.

I am referring to the work of the present fiscal year-I mean the work that has gone forward during the past 6 months-because it has a very important bearing upon the status of the highway employment that will be offered by this type of work during next fall and the following winter months.

I have prepared a diagram that will give you a rather clear picture of the situation. Submitting a chart.] The diagram has been arranged so as to show each month the employment offered by the different classes of work, The lower mass of employment shows the State maintenance; the next shows the State construction, both of which are financed from State funds, and all of which money, or prac tically all, comes from the automobile license fees and gas taxes of the various States. The section in red shows the amount of employment offered by the regular Federal-aid appropriation, which, as you see, is practically exhausted.

Mr. SINCLAIR. Running out?

Mr. MACDONALD. Yes; it is pinching out now.

EMPLOYMENT OFFERED UNDER P.W.A. ALLOTMENT OF FUNDS

The green mass shows the actual and estimated employment that will be offered by the $400,000,000 Public Works appropriation for highways.

Mr. SINCLAIR. That goes up to nearly 500,000?

Mr. MACDONALD. Five hundred and twenty-five thousand is our estimated employment for August for direct-job employment on highways for all State and Federal work.

There is included in the mass of employment that will be offered by the Public Works program 2,500,000 man-months. I want to talk about that question of the employment for just a moment.

Our reports are based on continuous employment. They do not report the number of pay-roll names. These figures that I am giving you show the continuous employment that will be offered. That is, for each month that average amount of employment is offered by the funds for every working day of the month.

Now, if we were to show all the names on the pay rolls, these figures as indicated on the diagram would be multiplied by 1.8. In other words, due to the turnover, the short week or the limited hours per month, and to a disconnection between jobs-that is, where one job ends and another begins, through weather interference and all-it has taken 1.8 pay-roll names to make one .continuous job employment.

Mr. SINCLAIR. That is almost twice as much; almost 2 to 1?

Mr. MACDONALD. Almost 2 to 1; and that is taken from a study of our actual pay rolls. It is a much better picture to give to the Congress, so that they can understand the situation of the amount of continuous employment that is offered by this work, rather than the number of pay-roll names. Where we may have names appearing for only a short time, we cannot claim that we are supporting that number from this particular fund.

Mr. SINCLAIR. You can start in by the chart at this present date, and you have a continuing and increasing employment practically throughout the year, up until

Mr. MACDONALD. Until June; yes, sir.

Mr. SINCLAIR. It goes beyond June, does it not?

Mr. MACDONALD. Until July it increases.

Mr. SANDLIN. It becomes stationary about August?

Mr. MACDONALD. Yes; it holds close to the maximum for 3 months; that is June, July, and August. Then it will break rapidly; and that is the serious situation that we face now. You see, by November there will be a drop in continuous employment from the peak of 525,000 to about 250,000.

Mr. SANDLIN. There is a difference of almost 300,000.

Mr. MACDONALD. Two hundred and seventy-five thousand to three hundred thousand men will be employed continuously on the Public Works highway projects for the three summer months of June, July, and August. Now, that means almost double that number of pay-roll names. In other words, it will take upwards of 1.8 pay-roll names to make one continuous job employment.

Mr. SANDLIN. It will be about 550,000 instead of 275,000?

Mr. MACDONALD. Yes, sir; including State and Federal highway work.

Then in addition there will be the industrial and indirect employment offered. That is easily one man for each man employed on the job, even with the shortened week. My own judgment is that it amounts to the equivalent of about 11⁄2 men for each one employed on the job.

Mr. SINCLAIR. One additional man in industry for each man on the road?

Mr. MACDONALD. At least one and probably one and a half. Mr. SANDLIN. That includes the men employed on the railroads and on the cars for hauling them, and all that?

Mr. MACDONALD. Yes, sir. It justifies the statement that actually more labor than that is supported by the highway dollar;

but even if we only make it one for one, we have through the middle of the summer at least three quarters of a million men directly participating in this single program.

PERCENTAGE OF FUNDS GOING INTO LABOR

Mr. SANDLIN. What percent of the money goes to labor, of all classes?

Mr. MACDONALD. Of all classes; you mean directly on the job? Mr. SANDLIN. No.

Mr. MACDONALD. Or which goes back to labor?

Mr. SANDLIN. Which goes back to labor.

Mr. MACDONALD. There is a variation with the different types of construction, but 80 percent is a conservative estimate. Some types, if you carry that distribution far enough, will go higher. We have actually carried it to 91 percent. I prefer to use the conservative figure and say that 80 to 85 percent goes quickly back to labor. How quickly has been a question until this fall, when we received definite information. We checked up with the manufacturers of road equipment the other day. The Public Works highway program began in July. The manufacturers of the larger equipment felt the effect in November; that is, beginning in November they had a noticeable. pick-up in their sales. In December individual manufacturers reported as much as 40-percent increase in their sales, and in January their sales showed, for the first 18 days, an amount greater than for the entire month of January of the previous year. In other words, it apparently took from August to the first of November to have the dollar make its cycle and reach the equipment plants. Of course there is something of a lag, because there is always available equipment that does not have to be manufactured. But apparently within 3 months this money was beginning to flow back through the regular channels of business to the equipment manufacturers.

Mr. SINCLAIR. Is there any other activity that will have as high a percentage of the money spent going to actual labor as this activity? Perhaps that is not well put.

Mr. MACDONALD. I understand what you mean, Mr. Sinclair and I should prefer to answer it in this way: I know of no other activity that will distribute money for labor to as many individuals.

Mr. SINCLAIR. Well, that answers the question pretty well.

Mr. MACDONALD. The further we go into a study of construction work under present conditions, when competition has been keen and there has been a surplus of labor, and the labor rates to some extent, particularly in the higher classes, have been determined by the sur plus of labor, we find on the whole that the average rate paid for high way work is less than for some of the more involved building con struction in cities. Averaging the rural and city conditions, highway labor rates are lower; so that, assuming that the same percentage of the construction dollar goes back to labor, there would be more individuals receiving a division of that dollar in this type of construction than in any other.

Mr. SINCLAIR. Of course you are familiar with the objection raised by some of our Members of Congress from the city districts or from the thickly populated districts to spending Federal funds out in the open spaces, where I come from. There cannot be so valid an objec

tion to this, since they are getting almost eight tenths of another dollar out of the $2 that are spent in my country.

Mr. MACDONALD. It is a fair and a conservative assumption to say this: That for all types of road work, assuming that we take the conservative figure of 80 percent going back to labor, off the job, there will be at least 50 cents of the dollar that goes to transportation of materials or the production of materials and equipment. That is a conservative statement. So, as that flows into the production centers, it gives employment in industry in normal occupations. That is one of the effects of the road work that we think of great importance the giving of employment in the fields that offer continuous and stable employment to the man in his accustomed environment. Also, this Public Works appropriation gave additional weight to the matter of distribution according to population over the old Federal-aid formula.

Mr. SINCLAIR. Yes; I understand that.

Mr. MACDONALD. And, in addition, 25 percent of the entire fund was set up for expenditure within the cities, so that the municipalities are receiving 25 percent of this apportionment in addition to the direct benefits-they have been called indirect, but I consider that incorrect the direct benefits which spring from industrial employment in production of materials, equipment, and auxiliary expenditures made for normal highway work.

That is another important feature, of course-comparing employment offered on normal highway production with work that is being done entirely with day labor or under hand-labor methods.

Mr. SINCLAIR. You do not believe that hand-labor methods would get anywhere near the same economic results?

Mr. MACDONALD. No; I do not. The effect of machinery in displacing the opportunity for employment on the job has perhaps not been over-emphasized but the use of equipment has increased employment in these other lines such as transportation and production. For example, the cost of maintaining a machine on the job is largely overestimated. A concrete mixer with a skip into which the materials are dumped from a truck will require a considerably smaller gang than the old method of loading the skip by wheelbarrows but the cost of the mixer as measured by the depreciation of the machine, is probably not over $150 a mile an inconsequential part of the cost. Equipment, using material that is produced off the job, increases employment off the job fully as much if not more than it decreases the men employed on the job, and the net result is that the public gets the benefit of lower priced production and more miles for the same amount of money.

Mr. HART. Your point is that because of the use of the machine more miles of road are probably built than would be built if we did not have the machine?

Mr. MACDONALD. Yes, sir; that is true. I would not argue that the machine does not displace common labor. It does. It steps up, however, the wages of the labor that is employed; and I do not believe that the machine decreases the percentage of the dollar that is divided ultimately back to labor. But the higher-priced labor gets more of that money.

Mr. HART. That is true also in an industry which is noted for its mass production; for instance, the automobile industry. If it were

not for mass production in the automobile industry, probably the number of men that are now employed would not be employed, because they would not have a market for their products.

Mr. MACDONALD. That is right.

Mr. HART. And if it were not for modern methods of manufacture. we probably would not have the present wide dissemination of the radio, and a lot of other things that we did not have 20 years ago. Mr. MACDONALD. Quite true.

Mr. SINCLAIR. Then the machine is not entirely to blame for the depression that we have gotten into?

Mr. MACDONALD. Oh, no; no, indeed.

Mr. SINCLAIR. Was it not the technocrats that said that we were in the machine age?

NEED OF STIMULATING CONSTRUCTION INDUSTRY

Mr. MACDONALD. I do not pretend to be profound enough to analyze all of the causes, but I do know that when we took the great construction industry out of business in this country we took out the biggest factor that was making for the employment of men and the support of business. I do not say that that was the only one, but it was the biggest.

For example, we probably reached during 1928 a construction program in this country, public and private, of upwards of 15 billions of dollars. If you wish to be conservative, drop that to 12 billions of dollars. If you drop it to 12 billions of dollars, that would represent certainly a minimum estimate of the public and private construction at that period.

Probably 9 billion dollars would support a reasonable annual construction program. From 7 to 9 billion dollars, depending a little on the level of prices for materials and labor, would support a airly reasonable program. That is, such a program would take up perhaps the share of unemployed that we ought to take up in construction, public and private.

For the last couple of years, or at least at our lowest point a year ago, we did not have total construction of as much as 2 billion dollars.

If you consider these facts, you find revealed one of the big causes of such a tremendous amount of unemployment in this country. For example, Detroit. A lot of the people that were reported as employed in the automobile business actually were not employed in the making of motor vehicles. They were employed in the remaking or rebuilding of factories, building facilities, rebuilding machines and reequipping plants with different or more modern types of machinery. Actually, while they were rated as engaged in the automobile industry, they were engaged in the construction industry.

If you follow that through all the different industrial centers in the country-steel mills, textile mills, and so on-you see what happened to this construction industry. The bottom dropped from under it.

It is not difficult to understand the tremendous amount of unemployment that we have had if we ascribe a fair percentage of it to this lack of construction-if my estimate of a drop from a 12billion-dollar-a-year expenditure for construction to 2 billion dollars is even within the realins of reasonableness; and I know it is.