59

organizations. In many cases, the Partnership organizations also receive funding
from state and local JT'PA recipients,

Based on some of our audit findings, I believe it would be very appropriate to re-
examine these discretionary awards to identify areas of potential cost-savings. For
example, the National Alliance of Business (NAB), a Partnership grantee, has re-
ceived funding from the Department of Labor since 1968, Since 1982, the earliest
period for which data is available, NAB has received some $96 million in funding,
including $6.2 million for Program Year 1994.

We audited the NAB grant for Program Years 1988 and 1989, and issued our re-
port in 1991. A major concern at the time of our audit was that the NAB grant had

en awarded on a noncompetitive basis; NAB has since competed for part of the
Partnership money it receives from ETA, and receives the balance on a noncompeti-
tive basis, The audit also disclosed that NAB had several outside sources of income,
including conference registration fees, publications sales, fee-for-services contracts,
membership sales, and fund raising. However, income realized from these activities
was not always reported as program income to DOL and, thus, was not used to off-
set expenses charged to the grant.

The question arises whether NAB and other organizations like it, some of which
already receive funding through the regular JTPA service delivery system, should
receive additional awards directly from ETA. From my perspective, anything that
can be described as “discretionary” should be looked at as a possible source of cost
savings. However, if it is determined that a continuing need for such Partnership
grants exists, we believe greater use of competitive procurement methods should be
made.

Another national program I wish to address is the Senior Community Service Em-
ployment Program (SCSEP). Of particular concern to us is the continued funding,
year after year, of the same nine nonprofit organizations and the U.S. Forest Serv-
ice to operate the national sponsors segment of SCSEP. The national sponsors fund-
ing equals 78 percent of total program funds and represents over $300 million for
Fiscal Year 1995.

‘Audits we have completed on selected SCSEP grantees over the years have identi-
fied significant questioned costs. For example, our audit of costs claimed by the Na-
tional Council on Aging (NCOA), an SCSEP national sponsor, for Calendar Years
(CYs) 1988-1989, and a second audit of NCOA costs for CY 1990, resulted in an
adverse opinion by the OIG on the costs claimed by NCOA and in ETA Grant Offi-
cer disallowances of nearly $800,000. A settlement agreement in the amount of
$400,000 was signed on March 15, 1995, between NCOA and the Department. Pre-
liminary indications from our ongoing audit of NCOA yrants for subsequent years
suggest that some of the deficiencies previously identified have continued.

spite these problems, language from congressional appropriations reports clear-
ly implies that ETA maintain the status quo in designating, without competition,
the national SCSEP sponsors. We believe that setting these organizations up as pre-
sumptive deliverers of the SCSEP program not only shields them from the con-
sequences of their own mismanagement, but also may preclude other organizations
from participating as program sponsors.

INDIRECT COSTS CHARGED BY CONTRACTORS AND GRANTEES

Mr. Chairman, another opportunity for cost savings is in the area of indirect costs
charged to the Government by contractors and grantees. In May 1994, I testified
before the Senate Appropriations Committee, Subcommittee on Labor, HHS and Re-
lated Agencies, regarding persistent abuses by contractors and grantees in submit-
ti fi improper indirect cost claims to the Government. I recommended that Federal
civilian agencies be given the same authority as was then available to the Defense
Department to assess penalties and interest against grantees and contractors, In re-
sponse to long-standing concerns by Federal agencies, Congress enacted the Federal
Acquisition Streamlining Act on October 13, 1994. The Act is a comprehensive re-
form measure that codifies and clarifies what costs contractors may submit to the
Government.

The Act provides civilian agencies with the authority to assess penalties and in-
terest against contractors for violations of the Federal Acquisition Regulation cost
principles. However, the Act did not extend these sanctions to grantees. Extending
the use of such sanctions to grantees would return more funds to the U.S. Treasury
in the event of disallowed costs. Increased sanctions hopefully would have a deter-
rent effect as well.

In addition to increased sanctions, J believe new approaches to indirect costs
should be explored. One such approach might be to reimburse grantees and contrac-
tors for indirect costs based on a flat percentage of their total direct costs. The per-


25

merit in the public discourse at this point, relative to these other
challenges?

Mr. REIcH. Congressman, the challenge of ensuring that women
and minorities get jobs and get good jobs and have equal oppor-
tunity with men and with white men is a major challenge for this
society. And I could have gone on at some length with other charts
I have, showing that the incidence of unemployment and low-wage
employment among women and minorities is much, much greater
than it is among wi ‘ite men.

Mr. FattTaH. OK, thank you. The chairman is urging me to come
to some conclusion. Thank you, Mr. Secretary.

Mr. SHays. Thanks, Chaka, we might have more time at the end.
Representative Morella is going to be given the floor at the cour-
tesy of Mr. Chrysler.

Ms. MoRELLA. I really appreciate that, Mr. Chrysler.

Mr. CHRYSLER. Sure.

Ms. MorELLa. I appreciate the courtesy of this committee. I'm

oing over to the Senate to testify on the airport bill to make sure
that National Airport is safe for all of us.

Secretary Reich, it’s a pleasure to be here with you, and I appre-
ciate the work that youve done at Department of Labor and work-
ing with you. I thank the chairman for having planned such a very
informative and important overview hearing for us.

I wanted to pick up briefly on a concept that was mentioned ear-
lier. You know, the Non-Traditional—the Apprenticeship Program,
I mentioned, was made, the Non-Traditional Employment for
‘Women Program, which I certainly support. But the Apprenticeship
Program, women in apprenticeships and non-traditional employ-
ment is my bill that became law, and it has been working very,
very successfully. And I know that it is one of the items probably
included within the recision list. However, I think it was originally
on your targeted list, which is how it was looked at, I think, by the
subcommittee in terms of the possibility for reducing. I am hopin
that you will reiterate the fact that it will definitely be continued,
I think it was a spin-off, also, to come up with a minority program,
because that one was working exceedingly well. And I’m just won-
dering if you can give us the sense that you are going to continue
with the program that I think is doing exceedingly well.

Mr. REICH. Yes, Congresswoman, our indications are that the
program works exceedingly well. And I did not mean to imply in
any way to the Appropriations Subcommittee or the Appropriations
Committee that that should be rescinded; in fact, quite the con-
trary. Our goal here is to expand these kinds of opportunities for
Americans.

My concern—and I have to be very candid with you and other
members of this panel—is that the recisions that we are experienc-
ing over a $2 billion recisions for the Department of Labor for 1995
are recisions that cut to the very heart of the mission of this coun-
try in preparing people for productive work in society. It is a false
economy, in my view, to cut funds for dislocated workers; to cut
funds for disadvantaged young people to get training; to cut funds
for even summer jobs—1995 and 1996, as a result of the recisions
that have been passed by the House, by the Appropriations Com-
Mittee, in 1995 and 1996, there will be no summer jobs for dis-


COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
WILLIAM F. CLINGER, JR., Pennsylvania, Chairman

BENJAMIN A. GILMAN, New York CARDISS COLLINS, Min

DAN BURTON, Indiana HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, JR., West Virginia
STEVEN SCHIFF, New Mexico MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York
WILLIAM H. ZELIFF, JR., New Hampshire JOHN M. SPRATT, JR., South Carolina
JOHN M MCHUGH, New York LOUISE McINTOSH SLAUGHTER, New
STEPHEN HORN, California York

JOHN L MICA, Florida PAUL E. KANJORSKI, Pennsylvania
PETER BLUTE, Massachusetts GARY A. CONDIT, California
THOMAS M. DAVIS, Virginia COLLIN C. PETERSON, Minnesota
DAVID M. MCINTOSH, Indiana KAREN L. THURMAN, Florida

JON D. FOX, Pennsylvania CAROLYN B. MALONEY, New York
RANDY TATE, Washington THOMAS M. BARRETT, Wisconsin
DICK CHRYSLER, Michigan GENE TAYLOR, Mississip,

GIL GUTKNECHT, Minnesota BARBARA-ROSE COLLI NS Michigan
MARK E. SOUDER, Indiana ELEANOR HOLMES NORTON, District of
WILLIAM J. MARTINI, New Jersey Columbia

JOE SCARBOROUGH, Florida JAMES P. MORAN, Virginia

JOHN B. SHADECG, Arizona GENE GREEN, Texas

MICHAEL PATRICK FLANAGAN, Illinois CARRIE P. MEEK, Florida

CHARLES F. BASS, New Hampshire FRANK MASCARA, Pennsylvania
STEVEN C. LATOURETTE, Ohio CHAKA FATTAH, Pennsylvania
MARSHALL “MARK” SANFORD, South ae

Carolina BERNARD SANDERS, Vermont
ROBERT L. EHRLICH, JR. Maryland (Independent)
JAMES L. CLARKE, Staff Director
KEVIN SABO, General Counsel
JupITH McCoy, Chief Clerk
Bup MYERS, Minority Staff Director

SUBCOMMITTEE ON HUMAN RESOURCES AND INTERGOVERNMENTAL RELATIONS.
CHRISTOPHER SHAYS, Connecticut, Chairman

MARK E. SHOUDER, Indiana EDOLPHUS TOWNS, New York
STEVEN SCHIFF, New Mexico ‘TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland BERNARD SANDERS, Vermont (Ind.)
THOMAS M. DAVIS, Virginia THOMAS M. BARRETT, Wisconsin
DICK CHRYSLER, Michigan GENE GREEN, Texas
WILLIAM J. MARTINI, New Jersey CHAKA FATTAH, Pennsylvania
JOE SCARBOROUGH, Florida HENRY A. WAXMAN, California
MARSHALL “MARK” SANFORD, South

Carolina

Ex OFFIcio

WILLIAM F. CLINGER, JR., Pennsylvania CARDISS COLLINS, Iinois
LAWRENCE HALLORAN, Staff Director
CHRISTOPHER ALLRED, Professional Staff Member
Ropert NEWMAN, Professional Sto/f Member
‘THOMAS Costa, Clerk
CHERYL PHELPS, Minority Professional Staff

ab


68

staffing, based on Labor's current enforcement approach, could improve the regu-
latory process.

PATCHWORK OF FEDERAL PROGRAMS SUPPORT WORKER DEVELOPMENT

In addition to its worker protection responsibilities, the Labor Department histori-
cally has been the focal point for federal workforce development, activities. Today,
however, Labor is responsible for less than a quarter of the nation’s job training pro-
grams (37 of the 163 programs), with a third of the $20.4 billion of federal spending

on workforce development, as illustrated in table 2.

Table 2: Number of Employment Training Programs, Agencies, and Fiscal Year 1995 Appropriations by Target
Group

Numbac of Fiscal year 1985 ap-

programs Other propriation (in mil

Taree group — tons)

Totat Labor 8S
Youth... 197 5 2BB 24a
Veterans .. 1 4 = 2 1,092 175
Disiocated workers 1 8 2 (1647574
Native Americans mo 1 30 lab 64
Economically disadvantaged 9° 3 4 3220 947
Women/menorties 6 0 3 69 0
Migrants 5 1 1 10 86
Homeless 5 1 3 n 0
Older workers - — 4 2 1 $62 463
Refugees so a 4 0 1 103 0
Nat categorized . - — 15 10 10 10.635 1,094
Total a oe 1633714 204146848

Our work has demonstrated that the federal government’s patchwork of programs
is characterized by overlap, duplication, wasted resources, and poor service quality
and creates confusion for clients, employers, and administrators.6 Additionally,
many agencies do not know if the their programs actually help people get jobs.
‘Thus, the effectiveness of these programs is also in question.

A SNAPSHOT OF LABOR’S WORKFORCE DEVELOPMENT PROGRAMS.

We identified that many of the problems that plague the majority of workforce
development, programs also are present in Labor’s programs. To illustrate, we will
highlight a few programs from youth, dislocated worker, and economically disadvan-
taged groups. In doing so, we are also suggesting that these programs may warrant
additional budget review. The programs all come under JTPA, which is funded on
a program year basis. That is, fiscal year 1995 appropriations will not be available
to states until July 1, 1995. Most ‘of the rograms experienced a budget increase
during fiscal year 1995, despite the overall reduction 4n the Department's budget
from 1994 to 1995. It is important to note that workforce development. programs
only provide assistance to a small minority of the eligible population—from about.
6 percent for the JTPA Title IA program for disadvantaged workers to about 30
ercent for dislocated workers. Budget reductions in some of these arcas would like-
ly result in a reduction in services provided to these populations.

YOUTH TARGET GROUP

* The JTPA Title IIC youth training program provides training to in-school
youth aged 14 and 15 and out-of-school economically disadvantaged youth, aged
16 to 21. Title ITC goals include helping youth increase long-term employabi
enhancing occupational, educational, and citizenship skills; and increasing em:
ployment and earnings. The program’s fiscal year 1995 budget totaled $549 mil-
ion, $10 million lower than fiscal year 1994 levels. A recent evaluation of the
earnings gains of out-of-school participants found the program to be ineffective.”

* The Job Corps rogram is primarily a residential program for severely di:
advantaged youth. It targets youth aged 16 to 21 with severe economic and edu-

Multiple Employment Training Programs: Major Overhaul Needed to Create a Nore Effi-
cient, Customer-Driven System, (GAO/T-HEHS-95~70).

7The National JTPA Study: Title IIA Impacts on Earnings and Employment at 13 Months,
Abt Associates, Inc. (Jan. 1993).


79

in that final column the agency responsible for enforcing those reg-
ulations.

Mr. BarreETT. OK. That is good.

You talked a little bit about the National Alliance of Businesses
that is referred to in your testimony. I don’t know what that is.
Can you help me out as to what that is? What is the National Alli-
ance of Businesses? I simply don’t know what it is.

Mr. FISCH. It is an advocacy group that was put together to work
with businesses throughout the United States and provide them
with, I Buess, some support here on the Hill. In that capacity they
also sell their services to different providers in the States for train-

Ing.

Sir. BarrETT. Is it a lobbying group?

Mr. CrAwForb. That is one of their functions.

Mr. FISCH. Yes, it has got a portion of it to do lobbying.

Mr. BARRETT. They get $96 million from the Federal Govern-
ment.

Mr. Fiscu. Yes, sir.

Mr. BARRETT. To lobby?

Mr. CRAWFORD. I don’t believe they can use——

Mr. Fiscu. They don’t use any of their Federal funding for lobby-
ing They make that very clear distinction.

ir. BARRETT. And where are they located?

Mr. Fiscu. They are located here in Washington, DC.

Mr. BarreETT. Do they have branch offices throughout the coun-
try?
Wir, Fiscu. I’m not sure of that, sir, but their primary head-
quarters is here in Washington, DC.

Mr. BarreTT. And it says NAB has competed for part of the part-
nership money it receives from ETA and. receives a balance on a
noncompetitive basis. How much—can you break that down?

Mr. Fiscu. I don’t have a figure of what is competed and not
competed at this point, but at one point it was all sole source. After
our audit they did compete a portion of the grant.

Mr. BarrETT. If you could get—if I could ask, Mr. Chairman, for
a breakdown as tc what percentage they received, I would appre-
ciate that.

{The information referred to follows:]

Agency: Employment and Training Administration (ETA), Office of Policy and Re-
search.

Recipient Name/Address: National Alliance of Business, 1201 New York Avenue,
N.W., Washington, D.C. 20005.

Type: Grant.

Amount: $5,230,000.

Authority: DLMS 2-833({(3)—one responsible source.

Purpose of Project: This project will enhance and promote participation of the
business sector in the partnership program of the federally funded employment and
training system. [t will provide general support services to Private Industry Coun-
cils and state job training coordinating councils to strengthen their roles as employ-
ment and training coordinators toward maximizing the resources and expertise of
the business sector.

Explanation of Recipient Choice: Services are available from only one responsible
source, and no substitute will suffice. The recipient has unique qualifications to per-
form the type of activities to be funded.

Percentage Spent on Administrative Costs: Not available.

Agency: Employment and Training Administration (ETA), Office of Policy and Re-
search.


15

Mr. Davis. As they move into some of these larger programs and
if it goes down to the States, the authority will just move down to
those levels of government, and they'll rise or fall on their own
merits.

Mr. REICH. Some of the programs will rise and fall on their own
merits. Again, the Non-Traditional Employment for Women—and I
want to make sure that I distinguish Setween the apprenticeship
program and the Non-Traditional Employment for Women. The ap-
prenticeship program is right now a separate program. It’s one of
an abundance, I mentioned before, 70-odd separate programs we
are consolidating.

The Non-Traditional Employment for Women, however, is not
consolidated. That is funded out of the Pilots and Demonstration
program. I’m hoping we can continue to fund that, but again, that
has been cut by $10 million and we're just going to have to estab-
lish priorities there.

Mr. Davis. Let me just ask one other question. The Consumer
Price Index and the definition of that, in terms of the basket—
there’s been a lot of discussion. Alan Greenspan, Congressional
Budget. Office and others seem to believe that it may be slightly
overstated. That falls under your jurisdiction.

Any effort being made, are further resources needed to try to get
a true line on what the actual number is? Because I think in fair-
ness to everybody on both sides of this equation, we want to make
sure we're ealing with accurate numbers because there are tre-
mendous costs and benefits riding on that.

Mr, REICH. Oh, absolutely. Every 10 years, the CPI is revised.
And it is going through its 10 year revision right now. We've re-
quested additional funds to even speed it further. There are two is-
sues—and I know that time is very limited—but let me just put on
the table very quickly two issues that bedevil that revision. And as
technology changes, those revisions become even more complicated.

One has to do with the fact that people inevitably substitute
products when one product gets more expensive. This is the steak
versus hamburger. If you’re now buying more hamburger than
steak, are you worse off, should you continue to measure steak in
terms of its increase or should you start measuring hamburgers?
The second has to do with the quality of products. Again, an issue
that is even more difficult, given technological changes, if you buy
a tire these days that’s twice as good and lasts twice as long as the
old tires, but costs not quite twice as much, how should that be
counted in the CPI?

The BLS is doing the technical work, but what concerns me—and
I want to repeat my concern for the record here—there should not
be, in my view, any effort on the part of Congress to force the BLS
to do something or to come out with results that the BLS does not
feel is absolutely accurate. We need to make sure that politics does
not intrude on BLS analyses.

Mr. Davis. Can I just take 10 seconds, Chris, to just follow?

Mr. SHays. Yes.

Mr. Davis. I would agree with that, and I think it makes the
whole process suspect to do that. But | think if you need more re-
sources and can get a quicker answer, it would behoove everybody
to do that.


74

ducting a study that tries to get a better handle on some of those
components, what are those components that make programs work
well.

Mr. Suays. You point out that 37 of the programs are run by the
Department of Labor. You are basically saying there are 19 youth
age employment programs, of which the Department has 7.

Mr. CRAWFORD. Yes.

Mr. Says. Is your sense that we should be consolidating these
programs, joining them together, block granting them? What do
you see as the general solution?

Mr. CRAWFORD. We think that one of the fixes that needs to be
made is a structural fix. We think that there are too many pro-
grams, they are run by too many different organizations. What we
would suggest that the Congress do and what we have said in the
past is, in deciding whether to consolidate one program with an-
other, we should be looking first at what is the principal focus of
that program. If the principal focus is job training, then maybe we
should look at it.

Within the youth area, we have job training programs. They fall
essentially, as I recall, into three categories. One sort of deals more
with in-school youth, another one deals with out-of-school youth,
and a third one deals with youth that are preparing to go to col-
lege. Maybe as you look at the youth programs we should look at
it in those three categories that we reported to the Congress.

Mr, SHAYS. As opposed to 19 programs, end up with three poten-
tially?

M. CRAWFORD. You could move toward maybe three programs
that seem to be—when you look at common goals, common objec-
tives, common clients, they are very similar.

Mr. SHays. My time has ended, but we are going to go one more
cycle through.

Mr. Towns.

Mr. Towns. Thank you very much, Mr. Chairman.

Let me begin by talking about block grants, and I guess to sort
of both of you, beginning with GAO’s recent report entitled “Block
grants: Characteristics, experience, and lessons learned,” cited a
number of specific limitations in previous block grant programs. In
light of this report, how would GAO recommend we overcome these
limitations in current block granting proposals before the Con-
gress?

Mr. CRAWFORD. While I haven’t had an opportunity to study the
various block grant proposals that are before the Congress, I could
offer some advice from our report, what we have learned.

One of the things that we would suggest—the first thing I guess
we want to mention is that from our experience it looks as though
most of the States were able to get up to speed and administer
block grants.

The second thing there that we would mention as advice would
be in the area of accountability and data. Many of the block grants
in the early eighties did not have good data or good accountability,
and what you found over time was a recategorization of programs
in part because we didn’t have data. Without data, you are not in
a position to know who is being served, and you become very sus-
ceptible then to putting set-asides in.


32

Pilot and Demonstration (P&D)
Projects Funded Under the Authonty of lob Training Pateership Act UTPA) Tile WV Part D

DATEOF EXPIRATION. «FY 1934
RECIPIENT NAME/PURPOSE rte map nate

‘South Central lowa Federation of Labor AFL-CIO... om VS-MAR-95 16-MAR-96 150,000
Program 1s designed to link students with workers who can demonstrate a re-
alistic view of a challenging, satisfying, occupationally diverse workplace.
Central lowa Building and Construction Trades Counti ancsnnenenewnren M-MAR-95 17-SEP-97 500,000
To establish a Center for Advance Journeyman Education to identity contem-
potary skill standards for the mature journeyman worker in the construc-
tion industry

OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION
TARGETED TRAINING PROGRAM GRANTS DESCRIPTION FY 1994

LUMBERJACK RESOURCE CONSERVATION AND DEVELOPMENT COUNCIL

Lumberjack sponsors logging safety training conducted by the Forest Industry
Safety and Training Alliance (FISTA). This is a continuation of an earlier grant. pro-
gram. The program provides basic in-woods safety t1 ing, follow-up safety training
and advanced safety g for loggers in Wisconsin and other midwest states.
Classroom sessions on the importance of safety and health programs are conducted
for logging employers. Two training videos are being developed during the grant.
CHICAGOLAND CONSTRUCTION SAFETY COUNCIL

This grant program is developing and will deliver training on fall protection to
the construction industry. Training targets workers who need basic hazard aware-
ness training and supervisors and competent persons. A trainer’s manual for both
segments is being developed as well as two videos and student books. Awareness
courses will be conducted in the Chicago area and trainer courses will be conducted
in Chicago and throughout the United States.

PAINTERS AND ALLIED TRADES LABOR MANAGEMENT COOPERATION

The Painters are developing a 12-hour safety and health course for its members.
Instructors will be trained to deliver the course, including Spanish-speaking instruc:
tors. These instructors will provide training at locations across the country. In addi-
tion, modules from the course will be adapted as toolbox training kits and distrib-
uted to small painting contractors for use in training their employees.

NATIONAL SAFETY COUNCIL

The National Safety Council is developing and implementing a two-day com:
prehensive safety and health training enurse for. employers and workers in. small

wusinesses in the Chicago area. Training content, focuses on general safety topics as
well as specific OSHA standards that address the high risk exposures of targeted
small business groups. Emphasis is on employee involvement in the safety and
health program and use of train-the-trainer approaches. The Chicago Urban League
is co-sponsoring the training.
ALICE HAMILTON OCCUPATIONAL HEALTH CENTER

Alice Hamilton Occupational Health Center was awarded a grant to assist small
business in a number of industries to develop safety and health programs. A pro-

m guide for establishing a safety and health program is being produced for each

industry and will be shared with other businesses. In addition, employers, labor
union locals, and others are receiving training and technical assistance.

AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOY-
EES (AFSCME)

AFSCME received a grant to develop and deliver training on the lookout/tagout
standard to members involved with the repair and maintenance of machinery, par-
ticularly those working with mechanical, electrical and fluid hazardous energy
sources. It is conducting train-the-trainer session and worker awareness sessions. A
pilot project will be conducted in Iowa using a statewide fiberoptic communications
system to provide the worker awareness training to State maintenance workers.



103

going to take 5 minutes. I just want to have a sense of your re-
sponse to my feeling that Republican administrations view the De-
partment of Labor one way. They give it a mission and appoint
people who have that sense of what the Department of Labor is
supposed to do under a Republican regime. I think it is very dif-
ferent under a Democratic regime. I think Democrats tend to think
the role of the department is to look out more for the unionized em-
ployee, versus Republicans who tend to find out what labor is going
to do to business and so on. You may not agree with that kind of
general assessment, but I’m interested if you do think there is
some truth to there being a different focus. What is its impact on
the Department in terms of its mission?

And I might just preface my comment by saying that my sense
is that—well, let me just have you answer the question. Do you
agree that there is a different focus with the administrations, and
what do you think its impact is?

Mr. BARNOW. I worked in the Department of Labor for about 9
years under both Democratic and Republican regimes. There does
seem to be some differences, but I think it was more on the regu-
latory side than it was on the employment and training side. I
think there were some different attitudes there, and that was the
bigger change rather than in the employment and training side. It
seemed to be more similar when the administration would change.

Mr. Suays. That is helpful. Thank you.

Would you all agree?

Ms. NIGHTINGALE. I agree. I have been doing research in and
around the Labor Department for 20 years, and there is more con-
sistency from administration to administration than there are dif-
ferences.

Mr. Suays. On job training?

Ms. NIGHTINGALE. On job training—unemployment and training.

Mr. Suays. In terms of Mr. Barnow’s comment about regulation?

Ms. NIGHTINGALE. That may be different. I have focused on em-
ployment and training.

Mr. Suays. Ms. Pindus.

Ms. PINDus. I don’t have anything to add.

Mr. Suays. OK.

I have concluded my questions.

Mr. Towns. Let me just raise a couple more.

In the IG’s testimony he expressed concern that the JTPA re-
forms may be undermined under a decentralized framework. In
your opinion, can States effectively administer this program?

Mr. BARNOW. In a sense they are—when they changed from
CETA to JTPA, the States did gain a major administrative role,
and I think the question is, was there—was the slack picked up by
the States.

Mr. Towns. Right.

Mr. BaRNow. Y think in the early years in particular there were
some problems because the States weren’t given as much guidance
from the Federal Government as would have been desirable. I
think that has changed—changed somewhat.

I think there has also been some concern that some people have
expressed, notably the JTPA advisory committee that put out its
report in 1989, that they would like to see more emphasis—this


39

nities through access to a learning framework offering the prospects of solid returns
in the form of jobs and higher earnings.

False economies

However, I believe the recent rescission of $2.3 billion by the House Subcommittee
on Appropriations exhibits a disregard for the need to maintain this successful in-
vestment strategy. The severe cuts being proposed in programs that serve disadvan-
taged youth and additional reductions in training programs for adults and dis-
located workers will eliminate or seriously undermine our ability, to provide for
‘Americans most in need of job training and job search assistance. The proposed re-
scissions will also damage our ability to enforce the laws that ensure worker protec-
tion in the areas of safety and health and labor standards.

We must recognize reality beginning with the fact that all Americans are not
equally well-poised to take advantage of the opportunities in today’s economy. The
unemployment rate among this nation’s young people, particularly minorities, looms
high above the overall unemployment rate. The proposed rescission of summer job
funding will have devastating effects on the 1.2 million disadvantaged young people,
who will be denied summer employment work experiences and desperately need
income. At a time when we are extolling the benefits of work over welfare, these
Priorities must seem incom rehensible to young people and their communities.

tes and municipalities will not only lose over $800 million in direct funding; they
will also suffer a commensurate loss in consumer purchasing power.

Such decisions are not only false economies, they run directly contrary to main-
stream American concerns, which evince a strong national commitment to assurin;
access for Americans to the skills and job protection that are increasingly require
for_a place in the middle-class.

Some suggest that education and job training are not federal responsibilities, and
the solution is to provide block grants to states so they may determine how to invest
in worker training programs, Bat the American people are not clamoring for public
resources to be diverted from one bureaucratic structure to another. They are asking
for less bureaucracy and more accountability.

Reinventing Health and Safety

Just as Americans who are ready to take responsibility to improve their own pros-
pects can expect the government to support their efforts, so too can workers legiti-
mately expect us to ensure that their workplaces are healthy, safe, and free from
discrimination. Many critics have targeted the programs and regulations of the Oc-
cupational Safety and Health Administration as an example of a program gone
awry—too many complicated, nonsensical, and overly intrusive regulations, as well
as incompetent and confrontational inspectors who focus on fines rather than job
safety and compliance assistance. Many horror stories are being cited to support
this position. But they do not accord with the facts.

Since its creation in 1970, OSHA’s standards and enforcement programs have
helped to reduce the workplace fatality rate by over 50% percent and made signifi-
cant inroads in reducing workplace injuries, particularly in high-risk industries like
construction and manufacturing. The record is clear: sensible standards have made
a difference between life and death for many American workers. For example:

« Strengthened trenching protections have reduced fatalities by 35%;

° Grain handling standards have helped cut fatalities by 58% and i
41%; an

* Cotton dust standards in the textile industry have dramatically reduced
“brown lung” cases from 40,000 cases to a few hundred.

In addition, OSHA inspections have helped make over 40,000 workplaces safer for
nearly two million working Americans.

Every year, work-related accidents and illnesses take an estimated 56,000 lives
and cost our economy over $100 billion. We have made significant progress in
reinventing the way that OSHA does business and we are committed to’ continuin,
to make the necessary changes to maximize the impact on worker safety. These ef-
forts include:

‘© measuring performance by real improvement in worker safety and health,
not the number of inspections conducted;
simplifying or eliminating outdated, vague, conflicting or duplicative regula-

juries by

tions;

« helping businesses identify and abate hazards, through technical assistance
free of citations or fines;

« targeting the most dangerous workplaces and hazards; and

© recognizing employers who have excellent safety and health records, ex-
empting them from general inspections.


64

Table 1: Department of Labor Appropriations and Staff-Year Spending

Fiscal Year 1995
Fiscal oar
1985 ap Falhtime
cee verte Sages
fea)

Unemplayment tn and Other Income Maint Expenses... 24,998 0
Employment and Training . ses 229 1,801
Enforcement... sr 1,029 10,229
Employment Standards Administration .. 273,677
Pension and Welfare Benefits Administration .. 69 621
Office of the American Workplace 31 400
Pension Benefits Guaranty Corporati . 138 687
Occupational Safety and Health Administration 332,323

Mine Safety and Health Administration .. . 2L = -2.52h
Bureau of Labor Statistics 7 351 2,583
Departmental Management 178 (2,569
Office of the Inspector Generat 52 490
TOtEE eee oneness 33,837 17,632

Note: Totals may not adé due to rounding,
Source: Department of Labor

DISSATISFACTION WITH LABOR’S CURRENT APPROACH TO WORKER PROTECTION

Despite Labor’s many contributions over its history to protecting workers, the De-
partment’s approaches do not appear well suited to the demands and challenges of
today’s work world. Moreover, workplace laws and regulations have risen in number
and complexity in the last 60 years. This, combined with Labor’s approach to enforc-
ing these worker protections through labor-intensive, on-site inspections and the im-

sition of fines and penalties viewed as “gotcha”-oriented, have created difficulties
Rr employers. Concerns have arisen that this approach does not recognize “good-
faith” efforts of businesses and questions have been asked as to whether this is the
most effective means for improving working conditions today. For example, Labor
continues to use on-site inspections to enforce OSHA regulations despite the addi-
tion of millions of new workplaces and employees in recent years. About 2,000 fed-
eral and state compliance officers are responsible for well over 6 million workplaces;
this equals a ratio of 1 inspector for every 3,000 workplaces.

Last year, we released a report that identified the many federal statutes compris:
ing the framework of federal workplace regulation and collected information about
actual employer and employee experiences with worker protection regulations.? To
obtain the experiences of those operating under federal workplace protection stat-
utes, we used a case study approach and interviewed a broad e of 36 employers
and employee representatives of organizations of large and small businesses in 24
different industries in different states. Six of the employers had less than 75 work-
ers; 12 had more than 500 workers. Nine of the businesses had multistate oper-
ations, and nine had some workers represented by a union.

In our study we found that, although firms of all sizes supported the need for
workplace regulations, employers and workers were more concerned with how regu-
lations are carried out rather than with the aims of the regulations. For example,
employers believed that

* regulatory agencies use a “gotcha” rather than a more collaborative ap-
proach;

« enforcement is unfair and inconsistent, in part due to lack of staff knowl-
edge of regulations and business operations;

© regulators fail to acknowledge good-faith compliance efforts; and

communication between agencies and firms and unions is poor.

Only 8 of the 26 key statutes and one executive order that we identified as the
core framework of federal workplace regulation—primarily covering areas such as
labor-management relations, minimum wages, and unemployment imsurance--were
in place by 1960. The number of statutes almost doubled by 1970 and reached 19
by 1980. Today, Labor oversees 21 of these statutes, and the Equal Employment Op-
portunities Commission (EEOC) oversees 4. (See fig. 1 and app. I.)

Workplace Regulation: Information on Selected Employer and Union Experiences (GAO/
HEHS-94-138, June 30, 1994). . per


35

I don’t want to suggest to anybody that a summer job is a criti-
cal, vital step on the way to learning a particular skill. No. But a
summer job, for many of these young People, it is the first paycheck
they ever have; the first time they are held responsible for being
someplace on time and being accountable and being reliable an
doing something that maintains a certain work experience. If they
are not doing that, and they want to work, I worry that they may
either be doing nothing—in fact, they're likely to be doing noth-
in wr else get into some mischief.

ir, BARRETT. OK, so is that program the one that——

Mr. REICH. The Inspector—excuse me, I was just handed a piece
of paper. One study by the Labor Department’s Inspector General
on a recent summer program in 1992 concluded that the work
projects were worthwhile; the summer jobs were real, they were
not make work; the typical ones were clerical positions, working
maintenance work on public properties, recreation work at parks,
supervising and tutoring children at daycare centers, serving as
nurses’ assistants in hospitals. The children, or the young people,
were closely supervised. They learned new skills they could apply
to their schoolwork. They took pride in their employment.

Now, this is the Inspector General of the Department of Labor.
The Inspector General is independent in the Department of Labor.
The Inspector General has minced no words when the Inspector
General staff has found programs that do not work.

Mr. BaRRETT. Sticking with jobs, very quickly—the welfare re-
form Packages you’ve seen, are there enough job-related aspects to
them?

Mr. REICH. No. There needs to be a standard, or there need to
be standards for hel; ing people get job training, job counseling, job
search assistance, jol placement and daycare.

Mr. BARRETT. I think my time is——

Mr. Suays. Yes, your time is up. Mr. Secretary, my credibility
matters more to me than most things, and it is 3 o’clock. I’m just
wondering if you might indulge both of us for another 5 minutes,
would that be alright?

Mr. REICH. Certainly.

Mr. Suays. Do you mind staying for 5 more minutes?

Mr. BARRETT. No, go ahead.

Mr. Suays. Your charts—we could spend a lot of time on any of
them, and I really appreciate that you went to the trouble of going
through them. They're pretty straightforward, and I accept your
basic contention that incomes for the poorest in our community
have gone down. I think it’s due to a combination of a lot of
things—our own national policy, but clearly world competitiveness
is a part of that and so on. It’s exciting, but also scary, that people
are going to have five separate careers in a lifetime, or more.

I’m just going to say for the record, that of all the programs, the
youth jobs program, to me, would be the last you’d eliminate. So

don’t know quite how some of us on our side of the aisle would
deal with it; whether we come in with an amendment or how we
Proceed, But we'd like to deal with the issue that Mr. Barrett
raised.

T have to tell you that your whole presentation to me speaks to
the need to do what we did in what was Ed & Labor Committee.


67

The growth in the Department's regulatory mandate has had important implica-
tions for the amount of workplace regulation. with which employers must comply.
Today, the magnitude, complexity, and dynamics of workplace regulation pose a for-
midable challenge for employers of all sizes. Such regulation has expanded and con-
tinually changed in the last 60 years, not only because of new laws but also because
of judicial decisions and new and revised regulations. Many employers and workers
may not be able to keep up with these dramatic changes. Smaller employers that
we interviewed appeared to be the least aware of workplace requiremenis; larger
employers felt unsure of all the rules that applied to their operations. This lack of
awareness and confidence contributed to a widespread fear of noncompliance amon;
the employers we interviewed. Union representatives that we talked to also
cussed the difficulty of getting accurate information from some government agen-
cies. They believed that this contributed to many workers’ Jack of awareness of their
workplace rights.

In addition, employers we interviewed questioned whether Labor’s agencies, as
they currently operate, were really meeting the goals of the governing statutes, such
as ensuring safe workplaces. They said that the agencies’ approach was generally
adversarial, characterized by poor communication and a lack of employer access to
regulatory information, unfair and inconsistent enforcement, and vague laws and
regulations that invited lawsuits. Some employers reported that the staff of some
agencies such as OSHA and Office of Federal Contract Compliance Programs
(OFCCP) often exhibited a “gotcha” attitude during their enforcement operations,
failing to acknowledge employers’ good-faith compliance efforts. For example, an of-
ficial at a large hospital said, “OSHA has conducted several inspections at our facil
ity, which we believe were done on a ‘gotcha’ approach. . . . The hospital is not al-
lowed to interpret the regulations and standards for the situations at hand.
standards are enforced too rigidly.”

OPPORTUNITIES TO REVAMP LABOR’S REGULATORY APPROACH

Today, a consensus is emerging that the federal government must change the way
it ensures worker protections. Therefore, we have an excellent opportunity to reex-
amine and rethink Labor's operations to find a less costly, more effective means of
ensuring worker protections.

Consistent with this perspective, many employers and union members we inter-
viewed expressed a belief in the need Yor federal regulatory agencies to adopt a

sreater service orientation and in a greater reliance on alternative regulatory strate-

a positive step, reserving strict enforcement to those individuals who
Under this approach there could be a greater reliance on mediation to resolve civil
rights and other workplace conflicts to avoid the high cost of litigation.

‘rom our past work, we also believe that other regulatory approaches, such as
placing greater responsibility on workers and individual employers to maintain a
safe and healthful workplace, show great promise in enabling agencies to perform
their statutory missions more effectively and at less cost to taxpayers. In our review
of employer workplace health and safety programs,? we determined that the poten-
tial reduction in injuries and illnesses could likely justify the additional burden as-
sociated with their implementation, at least for high-risk employers. Although we
did not review their effectiveness, we also noted that six states have required the
formation of joint labor-management health and safety committees and that OSHA
has issued voluntary guidelines on their formation.

Many employers and union representatives that we interviewed suggested that
government agencies could foster greater compliance by increasing the amount of
technical assistance they provide to employers and by educating workers more effec-
tively about their rights. Some of the suggestions that employers and union rep-
resentatives made included establishing toll-free hotlines and computer bulletin
boards to help employers get compliance information and establishing information
offices with ‘staff who would answer estions, provide education and outreach serv-
ices, and publish newsletters on regulatory developments. Some employer and union
representatives also suggested that improved training of agency staff and increased

* Occupational Safety and Health: Worksite Safety and Health Programs Show Promise (GAO!
HRD-92-68, May 19, 1992).

Worksite safety plans are essentially management systems for oversecing and controlling
safety and health in the workplace. Components of auch programs can include development of
‘a written plan addressing workplace hazards and the means to control these hazards, worker
training and education on health and safety, and employee involvement in the development and
implementation of the program,



104

was a group of people both from programs and Government who
said they would like to see more emphasis on the accountability
and the outcomes and less on just monitoring the process. So if
that were done, I think there could be more of a role for the States
and a little less for the Federal Government and it would work OK.

I think, again, you do need the Federal Government. As long as
it is a Federal program with Federal funding, the Federal Govern-
ment should be looking at how the States are doing, and if they
are not doing a good job then it would be time for a change.

Ms. NIGHTINGALE. I’m not exactly sure what he meant by that
comment, and one dimension of it could be that because there has
been a lot of change, and whenever there is a lot of change what
that causes is sort of ripples down through the system, and it takes
the system a while to adjust to previous reforms, and then before
you know it there is another set of reforms that are coming along.
So those are sort of shocks to the system that don’t have time to
settle down and to reach a steady state of maturity from the last
round of revisions and there were some changes. This has hap-
pened in employment and training for 30 years, that problems are
identified, Congress and the Labor Department take steps to try to
improve those changes, and before those new changes have had
time to—for anybody to know if they have worked or not worked,
then there is another round of changes that are imposed on top of
that.

So I wasn’t sure exactly what he meant in terms of undermining
the changes in improvements that were introduced but——

Mr. Towns. Let me just sort of raise something else.

I think it was you, Ms. Pindus, said that we would not reach the
kind of savings that we were looking to reach if we would do this
and do it right. And before you answer, let me say I agree with
you. But let me ask you, would I be in a position Tater on to say
that as a result of what we have done that we are going to improve
the quality of life for people and that more people now will be able
to benefit as a result of what we are doing?

Ms. Pinbus. I think, based on some of the State experiences, in
the long run that appears to be the case. The one thing to keep in
mind is, there is a considerable amount of up front investment, in
planning what programs ought to be consolidated and what is the

est way to consolidate. Investments must be made in integrated
computer systems, staff training, and many other things that are
needed to really provide that seamless and efficient model. But to
just give you a couple of examples of State programs—and I know
Iowa was mentioned before. We got some information from Iowa,
where they are integrating services from six State agencies. They
have realized some savings already in terms of rent, because they
have been able to colocate offices, and they are expecting savings
by fully automating and consolidating their separate intake proce-
dures for six different programs. So, there are definitely savings as
well as investments that they have to make to do this.

But almost all the States we spoke to said that what they were
doing was not cutting their budget based on those savings, but they
were taking it and using it to serve more participants. They were
finding it easier to reach participants, easier to provide access to


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87

in terms of cost reduction or in improved customer service and effi-
ciency.

The majority of State integration initiatives identified in our
study were motivated by the objective of improving efficiency, not
reducing program costs. Federal decisionmakers should be clear
about the relative priority of the two objectives, reducing costs or
improving program efficiency.

We analyzed the following examples of consolidation: Consolida-
tion of JTPA IIA and JOBS program for disadvantaged adults and
welfare recipients; consolidation of JTPA IIA, JOBS, and the em-
ployment service; consolidation of JTPA IIA, vocational education,
and adult basic education; and consolidation of six programs for
dislocated workers under JTPA Title III. The bottom line implica-
tion is that potential administrative savings of Federal consolida-
tion would depend on how much and what type of integration there
already is across the Nation at base line. Savings result from
streamlining paperwork, reducing administrative staff, and inte-
grating computer systems personnel and fiscal procedures.

If most States currently operate programs separately, then the
considerable up-front costs associated with implementing consolida-
tion would exceed any savings. Any potential savings would only
appear in the long run. If most States currently integrate service
delivery but not administration, there could be some small savings
in the short run.

Even under scenarios where there could be some administrative
cost savings, though, the amount of savings is not likely to be
great. Total Federal expenditures on administrative costs incurred
at the State level represent a very small percentage of total pro-
gram costs to begin with, generally only 1 or 2 percent of all Fed-
eral costs. Under the best case scenario there might also be some
small Federal savings at the local level.

If JTPA Title IIA and the JOBS program were totally consoli-
dated and if total administrative costs could be reduced by one-
third, that would represent about $127 million in Federal budget
savings.

There are some examples from the States in my written testi-
mony that back up the fact that motivation for consolidation is
mostly not for reducing budgets but for improving customer service.
Savings at the Federal level resulting from consolidation will be
mainly related to personnel and agency operations, not program
costs. The amount of savings will depend on the number and types
of programs combined, but since expenditures at the Federal level
are generally less than 1 percent of program costs the potential
savings are also low.

In conclusion, our analysis suggests that the potential for admin-
istrative savings is likely to be small relative to total direct pro-
gram service costs. This does not mean that consolidation of pro-
grams should not be seriously considered. In fact, most State pro-
gram administrators feel that some amount of consolidation and
operational simplification is critical to improve program effective-
ness and efficiency. Savings are expected in per customer costs, ef-
ficiencies that allow more individuals to be served with the existing
level of resources.


8

But let me just say, one important feature with adults would be
to turn the job training system into a system of one-stop career
centers where you can get job search assistance, job counseling,
good information about what jobs are available, but also what
skills are necessary for those jobs and what institutions have pro-
vided the best record in terms of getting those skills.

That information would be computerized; it would be digitized. It
would be available not only at one-stop career centers where you
could pick up your unemployment check or your welfare check, but,
it could also be available—and we are doing private projects right
now, making it available at shopping centers, at shopping malls.

And the President is also proposing that much of the adult job
training be put in the form of skill grants, or vouchers. Armed with
good information and skill grants or vouchers, we think that the
market can work effectively and efficiently to provide good training.
Or to put the matter another way, Mr. Chairman, members of the
committee, we believe that we have to move job training out of job
training programs and into purchasing power. And I want to un-
derscore that.

We have seen over the past 25 to 30 years, job training programs
gein up and down the ladder of federalism—the Comprehensive

mployment and Training Act; before that, the Manpower Develop-
ment and Training Act; in the 1980's, the Job Training Partnership

ct.

JTPA as originally drafted, was in effect a block grant formula
funded to the States. In recent years, it has moved back a little bit
toward Federal Government management because of the number of
problems that were identified by many people, including the In-
spector General, as to how those moneys were being used.

I would respectfully submit, it is a mistake to do this once again
as a block grant. Instead, we ought to award vouchers. We have
learned that bureaucracies are not going to be as responsive to
market forces, when you're talking about job training, as a market
would be. Armed with good information—computerized good infor-
mation—some quality control, in terms of making sure that these
institutions are accredited—that’s not that difficult, most of them
are community colleges, technical institutes—and some skill grant,
the market would police itself, by and large.

I note that there is a great interest in block granting as much
as can be block granted. In this area of adult training, when you
have the problems you have getting people the skills they need, let
us not simply follow the crowd and move in the direction that we
have tried before on block grants. The stakes are too high; the
needs are too great. We know that the analogy, the Pell Grant,
works well, reasonably well. Adults—we can expect them to work
even better. And if we had the information and job counseling and
job search assistance in one-stop centers, this is a system that
could help people get new jobs and get new jobs quickly. It makes
the entire economy more efficient.

Mr. SHays. Mr. Secretary, I’m sure we’re going to have a number
of questions in this area. What I’m thinking about is when we’re
going out to vote, we can turn those charts on end and leave them
up. That way a Member can ask you to bring one up and we can
go back and refer to it.


OVERSIGHT HEARING ON THE DEPARTMENT
OF LABOR

THURSDAY, MARCH 9, 1995

House OF REPRESENTATIVES,
SUBCOMMITTEE ON HUMAN RESOURCES AND
INTERGOVERNMENTAL RELATIONS,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Washington, DC.

The subcommittee met, pursuant to notice, at 1:20 p.m., in room
2247, Rayburn House Office Building, Hon. Christopher Shays
(chairman of the subcommittee) presiding.

Present: Representatives Shays, Morella, Davis, Chrysler, Mar-
tini, Scarborough, Towns, Lantos, Sanders, Barrett, Green, and
Fattah.

Staff present: Lawrence Halloran, staff director & counsel; Chris-
topher Allred and Robert Newman, professional staff; Thomas
Costa, clerk; Doris Jacobs, associate counsel; and Cheryl Phelps,
minority professional staff.

Mr. SHays. Mr. Secretary, it’s wonderful to have you here. We
have two members of our committee, and we're going to start.
We're going to have a number of interruptions, but we're going to
try very hard to accommodate your schedule. We're delighted you're
here. You're an extraordinarily articulate spokesman for the ad-
ministration, and we look forward to hearing what you have to say.

Our overall objective in this committee is to help you end up with
a better department. Our primary task is to look at waste, fraud
and abuse in the department, and to look at programs once they’ve
been set in operation. We will also pass judgment on legislation
dealing with how this department may be reorganized, both inter-
nally or if it’s combined with others. We'll have a significant say
in that process, and want to know how you feel about that issue.

We would like to know what you think the department is doing
well; where you think the challenges are in the department; and
what you think about the whole issue of reorganization. But the
bottom line is, this is your hearing. We're delighted you've come be-
fore our committee. We look forward to hearing what you have to
say. And I’m starting without my ranking member because he
didn’t make the elevator I was on. I don’t know if Bernie Sanders
would like to make a statement.

[The prepared statement of Hon. Christopher Shays follows:]

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73

Mr. FiscH. They have competed part of the grant to NAB. Some
of it is awarded on a sole source basis, and other portions of it are
competed, but it is not totally.

Mr. Suays. I guess I don’t understand why they wouldn’t be com-
petitive. It just seems to me so logical. iy would they have a
ock? We are talking gigantic dollars.

Mr. Fiscu. Yes, sir, we are.

Mr. SHays. What do they do for those dollars?

Mr. Fiscu. Well, NAB, itself, sir? NAB has run training pro-
grams around the country for JTPA.

Mr. Suays. So these are JTPA training programs, OK.

Mr. FISCH. Yes, sir.

Mr. SHays. I'm sorry, Mr. Crawford. You wanted to respond. I
just wanted to—

Mr. CRAWFORD. Yes, I understand.

We looked at some of the noncompetitive discretionary Grants as
well, and we found that what you have in some cases is language
in the appropriations conference reports that suggests that the De-
partment award—continue to award these contracts. You will find
that some of these groups have been receiving grants for up to 25
years.

Mr. Suays. This is the result not of language in the bills but of
the conference report language encouraging the Department to con-
tinue—in other words, the money is appropriated, but it doesn’t
specifically say it will go to the NAB, it says in report language
that it is expected that it would? Is that what you are saying?

Mr. Fiscu. I think the lan e reads something to the effect
that these grants should be awarded to such agencies or such busi-
nesses as, and they name specific situations in the language.

Mr, Suays. Mr. Crawford, in your report about job training,
which really is a devastating report, I remember when we went
over this last year and—was it last year or the year before last?

Mr. CRAWFORD. Last year, Mr. Chairman.

Mr. SHays, Yes. I mean it was absolutely devastating. I read this
paragraph: “Our work has demonstrated that the Federal Govern-
ment’s patchwork of programs is characterized by overlapping, du-
plication, wasted resources, and poor service quality, and creates
confusion for clients, employers, and administrators. Addition-
ally"—as if there could Se anything additional—‘Additionally,
many agencies do not know if their programs actually help people
get jobs. Thus the effectiveness of these programs is also in ques-
tion.”

What is left to say that is good about it? I mean this, to me, is
a real statement that cries out to us. I know other committees are
also getting into this, but it seems to me to be crying out for our
attention. at is being run well, or is the indictment pretty much
universal as it relates to this?

Mr. CRAWFORD. I think from the programs we have looked at, I
think the indictment is pretty much universal.

Mr. SHAYS. It is what, sir?

Mr. Crawrorb. Universal.

Mr. SHays. Yes.

Mr. CRAWFORD. I think what you will find though are pockets of
programs that are run well, and we are now in the process of con-


82

up of representatives of business and unions to work with us to
help us construct this study, and what we generally found was that
workplace regulation was important but it wasn’t always the most
important to a business.

Generally, what the business’s principal function was, if it is a
small diner, their most important concern was local licensing,
health licensing, for their businesses. With that said, what you
found, what we heard most was—concerns about OSHA and EEOC
were the two that consistently were cited by employers.

Mr. SHAYS. I’m trying to look at it from the Department’s stand-
point. Do they think that businesses will use as an excuse, that
they didn’t know, and, if they think OSHA is on their trail, invite
them in to come look and then say, “Tell us what we need to cor-
rect”?

Do you think the mentality of business is that they will just
muddle through, and when it comes close to being reviewed, then
they will ask for a review? I’m just trying to understand why the
Department would approach it this way. Give me the best argu-
ment the Department has.

Mr. CRAWFORD. Well, I'll give you an argument. I’m sure the De-
partment will have even a better one.

I think what you have is, over time the Department has done a
good job, and its approach has evolved over time into one that has
been primarily enforcement and regulation, and it has done a good
job. What we are arguing about now is that the times have
changed, it is time for the Department to change. They are trying
to do things differently. They are trying to issue standards in clear-
er language. They are trying to improve the way they inspect. Our
concern is that they may not be going quite far enough.

The employers would like a way—and union groups too—would
like a way to have OSHA come in, or other parts of the Depart-
ment, or EEOC, and advise them, as you say. Now the Department
does have voluntary programs. It has the Voluntary Protection Pro-
gram, which is generally a pr m that is—has large petrochemi-
cal companies in it. There are about, I think, 200 sites, 100,000 em-
ployees, where OSHA comes in, helps them work on their stand-
ards, helps them beef up their standards, and in return OSHA’s
role there is more technical advice and assistance as opposed to in-
spection and citation.

Mr. Suays. A theme that is kind of coming through, is that some
of these laws were created in an industrial society. Then a whole
new set of laws were created from the 1960’s on. I mean a whole
plethora of them. We are really into a new age of information, it
is a whole different competitive environment out there, and it
strikes me that one of the messages I’m hearing is that the Depart-
ment has to get with it and adjust to this new environment.

I would like to ask you, Mr. Masten: A statement you made be-
fore the Appropriations Committee that you didn’t focus in on in
terms of your testimony here dealt with unemployment insurance
fraud. I’m just curious. This was on January 11, Mr. Masten, when

‘ou were before the Subcommittee on Labor, HHS, and Education.

‘ou stated that over the past 5 years OIG investigations have un-
covered more than a dozen separate fraudulent unemployment in-


OVERSIGHT HEARING ON THE DEPARTMENT OF
LABOR

HEARINGS

BEFORE THE

SUBCOMMITTEE ON HUMAN RESOURCES
AND INTERGOVERNMENTAL RELATIONS

OF THE

COMMITTEE ON GOVERNMENT
REFORM AND OVERSIGHT
HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
FIRST SESSION

MARCH 9, AND APRIL 4, 1995

Printed for the use of the Committee on Government Reform and Oversight

a

U.S. GOVERNMENT PRINTING OFFICE
23-219 CC WASHINGTON : 1996

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-052544-6
a



108

terms of actually addressing the problem, and so thank you very,
very much for your testimony.

Ms. Pinvus. Thank you.

Mr. SHays. Can I ask you, is it one isolated individual? I mean
you think that——

Mr. Towns. You only gave one example.

Ms. NIGHTINGALE. Did you say—what?

Mr. SHays. I mean the terminology you used blew my mind, “re-
tired on the job.” I didn’t make that up, that is a phrase that is
used. It is a mentality, and it isn’t an isolated individual. That is
the problem, it is simply not isolated, and the terminology used,
“retired on the job,” is something you said was a problem and is
no longer a problem. And, you know, I consider that a very candid
but honest remark.

We adjourn this hearing, and thank you all for coming.

(Whereupon, at 12:17 p.m., the subcommittee was adjourned.]

{Additional information submitted for the hearing record is as
follows. Due to high printing costs this information can be found
in subcommittee files. ]

Cost SAVINGS AT THE DEPARTMENT OF LABOR
ATTACHMENT INDEX

Attachment 1 Office of Inspector General, Semiannual Report to the Congress.
April 1, 1994 - September 30, 1994

‘Attachment 2 Ollice of Inspector General, Semiannval Report to the Congress, Oc-
tober 1, 1993 - March 31, 1964

‘Attachment 3 Olfice of Inspector General, Semiannual Report to the Congress,
April 1, 1993 - September 30, 1993

‘Attachment 4 Oilice of Inspector General, Semiannual Report to the Congress, Oc-
tober 1, 1992 - March 31, 1993

‘Attachment 5 GAO testimony before the Subcommittee on Postsecondary Edu-
cation, Training and Lifelong Learning, February 6, 1994, “Multiple Employment
Training Programs, Major Overhaul Needed to Greate a More EMicient, Customer-
Driven System”

‘Attachment 6 GAO report, February 1994, “Department of Labor, Noncompetitive,
Discretionary Grants”

‘Attachment 7 Urban Institute Report, coauthored by Nancy Pindus and Demetra
Smith Nightingale for the Department’ of Labor, November. 1994, “Administrative
Cost Savings Resulting From Federal Program Consolidation”

1e)




30

every President. President Bush also used the executive authority
with regard to ensuring that government contractors maintained
certain standards. This is not new; this is something that every
President, to my knowledge, has done, in terms of using Executive
orders to ensure that that Federal procurement and those Federal
contractors maintained minimal standards.

Mr. CHRYSLER. Have you heard of an organization called the Na-
tional Council of Senior Citizens?

Mr. REICH. I have heard of the organization, yes.

Mr. CHRYSLER. Do you view its $68 million in Federal grant
money as an essential service of government?

Mr. REIcu. I am sure that if they received $68 million, Congress-
man, that we had—if you're referring to the amount that they re-
ceived from the Department of Labor, is that what you're referring
to?

There’s a highly competitive system for awarding grants, based
upon whether the particular application gets people jobs; is a train-
ing program that is a pilot project or a demonstration grant; that
is unique, original, has not been replicated before; that there’s an
evaluation component built into those. And I’m happy to share with
you any of the details about that one.

Mr. CHRYSLER. Even though they only raise about $105,000 from
their own membership?

Mr. REICH. Well, again, it has to do with the quality of the par-
ticular application. They must get the grant, by the way, under
Title 5 of the Older Americans Ret, with regard to that particular
grant recipient.

Mr. CHRYSLER. Do you agree that the National Labor Relations
Board ought to spend $20 million on the Teamsters’ election next

ear?
» Mr. REICH. Under the National Labor Relations——

Mr. CHRYSLER. Board—spend $20 million on the Teamsters’ elec-
tion for next year? Fund it.

Mr. REICH. Well, if you’re referring to ensuring that labor elec-
tions are fair and that they are undertaken according to law, this
is an appropriation that—this is a responsibility that government
has maintained for decades, and it is a responsibility that Congress
has asked the Department of Labor to undertake.

Mr. CHRYSLER. In 1991, they decided to do that. I guess I'd ap-
preciate if you could provide to my office a full accounting of any
and all the grants that the Labor Department provides to labor
unions, public interest groups, a National Endowment In Democ-
racy. And also, I understand, being on the Banking Committee,
that the Labor Department also oversees pension funds.

Mr. REICH. Let me make sure I understand the request. Did you
say National Endowment for Democracy, Congressman?

Mr. CHRYSLER. Grants that the Labor Department provides to
labor unions, public interest groups, National Endowment for De-
mocracy and your oversight on the pension funds.

Mr. REICH. And with regard to oversight on pension funds, you
would like general information on the oversight of pension funds,
or how we administer the oversight of pension funds?

Mr. CHRYSLER. Yes.

Mr. REICH. Sure, we can get that to you.


89

will be lower than if each program has its own separate operation. However, there
may also be a point beyond which no economies of scale result.

rd, public management and efficiency experts contend, to really maximize effi-
ciency over the long run, public agencies should emphasize improving overall pro-
gram services by focusing on customer service and optimal use of technology. Simpl
consolidating existing programs if they are not already operating at maximum effi-
ciency and productivity is not likely to produce maximum efficiency in the newly
created system.

Finally, administrative savings that result from consolidation can either (1) offset
costs of the overall program, thus resulting in real program cost reductions; or (2)
be redirected from administrative activities to direct service activities. The benefits,
then, can either be measured in terms of cost reduction or in improved customer
service and efficiency. The majority of state integration initiatives identified in our
study were motivated by the objective of improving efficiency, not reducing program
costs, Federal decision makers should be clear about the relative priority of the two
objectives—reducing costa or improving program efficiency.

CANDIDATES FOR PROGRAM CONSOLIDATION

Congress and the General Accounting Office have focused attention on the num-
ber of employment-related programs across different agencies, raising new questions
about the possible overlap of program services and program customers and about
the feasibility of consolidating programs. The GAO has begun a useful process of
identifying potential areas of overlap and opportunities for program consolidation by
looking at target populations, goals, and administrative and service delivery struc-
tures of programs. But, the exact number of programs varies depending upon the
specific criteria applied to characterize a “program” as well as the definition used
for “employment and training.” An accurate operational definition of an employment
and training program is “a program that provides employment-related training or
other direct assistance to individuals.” Using this defini , the Department of
Labor currently in fiscal year 1994 administers 20 programs that provide job train-
ing and/or employment assistance to individuals:

« Job Training Partnership Act (JTPA) Title IIA-Training for Economically
Disadvantaged Adults

‘* JTPA Title IIB-Summer Youth Employment Program

« JTPA Title IIC-Year Round Training for Economically Disadvantaged Youth

« JTPA Title [JI-Economic Dislocation and Worker Adjustment Assistance
(EDWAA)

« JTPA Title IfI-Defense Conversion Adjustment Program (DCAP)

+ JTPA Title IlI-Defense Diversification Program (DDP)

« JTPA Title IlI-Clean Air Employment Transition Assistance Program
(CAETA)

« Trade Adjustment Assistance

«NAFTA ridger Program

« School-to-Work Opportunities Program

« Community Service Employment for Older Americans

« JTPA Title IVA-Migrant and Seasonal Farmworkers Program

+ JTPA Title IVA-Native American Employment Program

¢ JTPA Title IVB-Job Corps

« Veterans Employment Program

* Homeless Veterans Integration Project (McKinney Act)

« Job Training for the Homeless Demonstration Program (McKinney Act)

«Employment Service

« Disabled Veterans Outreach Program

« Local Veterans Employment Representative Program

In addition to the DOL programs, important employment and training-related

programs also are administered through other federal agencies, including:
Vocational Education (U.S. Department of Education)
Adult Basic Education (U.S. Department of Education)
» Job Opportunities and Basic Buills (JOBS) Program (U.S. Department of
Health and Human Services)
* Pood Stamp Employment and Training Program (U.S. Department of Agri-
culture’

FINDINGS AND CONCLUSIONS

We analyzed the following examples of consolidation, considering the potential for
saving federal administrative costs incurred at the state and local level, and in a
separate analysis, at the federal level:


84

there is no doubt about it, some of them have been. Others need
to be strengthened, I think there is no doubt, I think we all agree
with that, but I think we have to be concerned.

I come from New York City, and I just can envision that all of
a sudden, based on what we are doing, that we will have a lot of
people coming into the city trying to survive. And I think we ought
to be very concerned about that because we have been down this
road before, and when we talk about block grants, and if we do not
have some kind of oversight and some kind of way to determine in
terms of whether or not you are actually addressing the needs, we
could have some big problems at the other end, and I know you
have looked at that a little bit.

Mr. CRAWFORD. We have offered some suggestions to Congress as
early as last year as it looks at reforming job training, and there
were four pieces that we have said it would be easier to access.
Many of these programs are hard to find and hard to access. More
efficient use of resources in the area, and the area I think you are
talking about concerns the variety of services.

We have suggested that whatever groups the Congress chooses
to serve in its job training programs, that the services be tailored
to the needs of individuals. We found in some cases where a person
would end up going to a service provider and there wouldn’t be an
independent assessment.

For example, a person goes—-sees an advertisement on T.V. at 2
a.m., for a truck driving school, goes to the truck driving school, is
assessed, and guess what he is assessed to be? A truck driver. And
he is trained as a truck driver. And what we would argue is that
you need to have independent assessment so that whatever groups
the Congress chooses to serve, people are served well.

And the last of the four points is one of accountability, making
sure we know not only the dollars but also the outcomes.

Mr. FiscH. Congressman Towns, I think if a lot of the programs
had, as we stated earlier here, some long-term measures as to the
success rather than the numbers of people served and the number
of people that went through the program, maybe we wouldn’t be in
a situation today where we are cutting this and cutting that and
cutting this and cutting that. If the long-term measurements had
been there, some of these programs would have been able to prove
themselves out.

Mr. Crawrorp. You find also, Congressman Towns, in one case
we even had a—I had a conversation with a service provider who
was telling me how well his program was functioning, and his
measure of success was the number of people trained, not nec-
essarily the number of people employed as a result of the training.

Mr. Towns. Let me ask, what happens if a State decides that,
“T’m not going to get involved in any kind of employment and train-
ing, I’m not even going to get involved in the program?” What hap-
pens in a case like that?

Mr. CRAWFORD. I don’t think we have had one.

Mr. Fiscu. I don’t think we have ever had anybody not take the
money, sir.

Mr. CrawrorD. No.

Mr. Towns. But you have had some people take the money and
not do what they were supposed to do.


12

desktop publishing, physical therapists, occupational therapists,
home health care Workers, numerically controlled machine tool op-
erators. I can go through a long list. These people are the new mid-
dle class.

If we can get people trained and give them some help—they’re
already trying, but given the trends, the odds are against them—
if we can, as a society, get them some help to get across the great
divide, there are the beginnings of a new middie class in America
that can be sustained.

Mr. SHays. Before 1 call on Mr. Sanders to have his 5 minutes,
I don’t know if that clock is working, but I do want to introduce
other Members who have been here while you have made your
presentation. Mr. Chrysler from Minnesota—Michigan, I’m sorry.

Mr. CHRYSLER. I was born in Minnesota, so it’s OK.

Mr. SHays. OK, from Michigan; Mr. Davis from Virginia; Mr.
Martini from New Jersey; Ms. Morella from Maryland; also Mr.
Fattah from Pennsylvania; Mr. Green from Texas was here; and
Mr. Barrett from Wisconsin. We all are appreciative of your testi-
mony.

I just would make a comment before Mr. Sanders asks you ques-
tions. You seem to be, in my own mind, reinforcing the general con-
cept Steve Gunderson has made that we need to combine labor and
education into one department. A lot of what you seem to talk
about is education and labor needs. And it seems to me to be a very
comfortable marriage. I’m not asking you to address that now, be-
cause my time is up, but maybe later you'll address that issue. Mr.
Sanders.

Mr. SANDERS. Thank you very much, Mr. Chairman. I very much
enjoyed the Secretary’s presentation. I have basically two ques-
tions.

I appreciate his opening remarks because he raised issues that
are not raised often enough in this country. And what he talked
about is the growing gap between the rich and the poor. He talked
about the decline in real wages facing ordinary American workers.
He indicated the rise in low-wage jobs, which is certainly the truth
in my State of Vermont. And he talked about the significant de-
cline of the purchasing power of the minimum wage, which is to
my mind a terribly important issue.

Mr. Secretary, I’d like to read for you a quote by a fellow econo-
mist, Lester Thurow, who I’m sure you know from MIT. And Mr.
Thurow writes, he says, and this is May 8, 1994, it says “In the
United States, if one adds together the officially unemployed, dis-
couraged workers who have stopped actively searching for work
and those with part-time jobs who want full-time work, 15 percent
of the labor force, 19 million people, are looking for work.”

Is he right?

Mr. REICH. That’s approximately correct. Again, we do not have
the February figures yet, but in January, although the official un-
employment rate was down to 5.7, that official rate hides two
things. No. 1, it hides the people who are working part time and
would rather be working full time, and it also hides the people who
are too discouraged to look for work.

I might also add that it hides the people who would like to work,
but who, because there is no work that pays nearly enough to make


54

Another area of concern relates to the current discussion of block
grants as a funding mechanism for a one-stop delivery system.
JTPA was amended in 1992 to improve JTPA procurement as well
as program and cost accountability. The amendments were par-
tially in response to problems and abuses identified by OIG audits.
I am concerned that these reforms might be diminished or discon-
tinued with a decentralized framework. Thus, we would rec-
ommend that in considering a block grant approach to job training,
Congress ensure that the standards of accountability established by
the 1992 amendments are preserved.

Another area where we have some concern is the consistent, rel-
atively low performance of a number of Job Corps Centers. We are
of the opinion that this needs to be addressed before the program
is expanded. We are encouraged by the Job Corps management’s
Tecent commitment to conduct, in conjunction with the OIG, a com-
prehensive review of the best and worst centers to identify factors
contributing to poor performance and to take corrective action. Job
Corps has also significantly revised its performance standards for
its centers in order to improve overall program performance.

Mr. Chairman, as you may recall, in my previous testimony be-
fore this subcommittee last September, as a result of our findings
in a nationwide audit of the Targeted Job Tax Credit, the TJTC
program, for the first time in the history of the OIG, my office
called for the elimination of a program. Even though the tax credit
was created to encourage employers to hire members of hard to em-
ploy target groups, our audit determined that 92 percent of the in-
dividuals in our sample would have been hired even without TJTC.
We also found that hiring decisions were typically made before an
individual’s TJTC eligibility was determined. The Joint Committee
on Taxation estimates that TJTC resulted in expenditures and lost
Federal tax revenue of nearly $300 million in 1994 alone.

While the program expired last December, we remain concerned
because, in the past, the program has been allowed to expire, but
then it has been reauthorized We are of the opinion that the high
cost and ineffectiveness of this program place it squarely on the list
of programs that should be eliminated.

Mr. Chairman, as you may be aware, the Federal Employee Com-
pensation Act, FECA, is the basic workers’ compensation program
for Federal and other covered employees. During fiscal year 1994
Federal agencies spent $1.2 billion on compensation and $485 mil-
lion on medical benefits. Over the years our investigations have un-
covered many schemes by medical providers and claimants to de-
fraud this program. The OIG is of the opinion that real savings
may be achieved by the Federal Government if both Federal agen-
cies and DOL effectively monitor FECA cases to detect and prevent
fraud both from claimants and providers.

Mr. Chairman, in my full statement I also discuss our rec-
ommendations that ETA implement full cost recovery user charges
to make the Foreign Labor Certification Program self-sustaining
and some concerns and recommendations related to discretionary
and noncompetitive grants, and indirect costs charged to the Gov-
ernment by contractors and grantees.


96

The Department of Labor's proposal to combine its dislocated worker programs is
a first step in reducing such barriers.

At the participant level, it has long been recognized that it is important to provide
services as seamlessly as possible to participants. A survey of the 50 states con-
ducted in 1993 by the Urban Institute found that all but 3 states have implemented
at least some form of “one-stop shop” for human service programs.® As part of its
new dle Class Bill of Rights initiative, the Department of Labor has proposed
estab! ing one-stop career centers. I have not seen the details of this initiative,
but if the initiative provides state and local flexibility and the current demonstra-
tions prove effective, one-stop centers may make entry and participation in the em-
ployment and training system much easier for American workers and labor market
entrants,

In an important sense, the 1992 amendments to JTPA may have used the wrong
strategy to dea] with problems encountered by GAO and the OIG. The amendments
are very prescriptive about how local programs are to serve participants. Instead,
Congress might consider giving states and local programs more flexibility but hold-
ing them more accountable for the outcomes. The discussion of on-the job training
that follows provides an example of how the current system may be too focused on
process rather than outcomes.

ENCOURAGING ON-THE-JOB TRAINING

1 would like to conclude my testimony. by briefly discussing the use of on-the-job
training (OJT) as an activity in JTPA. OJT has been one of the success stories in
the employment and training field. The recent evaluation of JTPA found that for
adults, the impact on earnings for those assigned to OJT was always statistically
significant and. of greater magnitude than the impact of other activities (such as
classroom training); a recently completed study has shown that OJT is the most ef-
fective activity for welfare recipients.? However, field studies by GAO and OIG iden-
tified some abuses of OJT. In particular, in some instances OJT was used as a wage
subsidy for low-skill jobs where little if any training occurred. A few service delivery
areas I visited recently told of how participants were “traincd” for three months to
become dishwashers. Acting on the GAO and OIG reports, Congress added a num-
ber of additional] requirements for OJT contracts which have resulted in the curtail-
ment of OJT for adults and the virtual elimination of this activity for youth. Since
the JTPA evaluation clearly indicates that OJT is the most promising strategy for
adults, Congress and the Department of Labor should consider steps to encourage
increased use of OUT while still avoiding the abuse that sometimes occurred.

Mr. SHays. You all were here when the Inspector General and
the GAO testified. They talked about specific kinds of programs,
some of which cost a lot. You made reference to job training pro-
grams in particular, and both Ms. Pindus and Ms. Nightingale, you
focused in on the whole issue of consolidation and can there be cost
savings. You are talking about cost savings as it relates to all dif-
ferent kinds of programs, or as it relates primarily with the JOBS
program? I’m trying to get a handle on your general point.

Ms. Nightingale.

Ms. NIGHTINGALE. We really focused on the potential for admin-
istrative cost savings.

Mr. Says. With what?

Ms. NIGHTINGALE. At the Federal level in whatever combinations
of programs might be considered, so that—we were asked by the
Labor Department to try to come up with a framework that could
be used to analyze the potential cost savings that might result from

Pamela A. Holcomb, Kristin S. Seefeldt, John Trutko, and Burt S. Barnow, One-Stop Shop-
ping Service Integration: Dimensions, Key Characteristics, and Impediments to Imple-
mentation, The Urban Institute, September 1993.

"Howard S. Bloom, Larry L. Orr, George Cave, Stephen H. Bell, and Fred Doolittle, The Na-
tional JTPA Study: Title IIA Impacts on Earnings and Employment at 18 Months, U.S. Depart-
ment of Labor, 1993; and Jodi Nudelman, The Impacta of Job Training for Women on AFDC:
An Analysis of Title IT~A of the Job Training Partnership Act, Unpublished Master's Thesis,
Johas Hopkins University Institute for Policy Studies, Aprit 1998.



1%

We think there should be accountability not only for dollars but
accountability for outcomes, and I think the chief tension that the
Congress is working through or having to work through is, how do
you construct appropriate accountability and at the same time as-
sure sufficient local flexibility to carry out the aims of the block
grants. That is a tension, we would argue.

You would also want to look maybe at the funding mechanisms.
Many of the—I believe the early Block grants, some of them had
a hold harmless provision. You may want to fook at funding for-
mulas that would take into account not only what a community re-
ceives today but also look at issues of the community’s ability to
pay, what are the program goals, those kinds of things. I think
that, in a nutshell, summarizes our suggestions to the Congress.

Mr. Towns, You know, you still didn’t quite answer my real con-
cern. That is, how can we ensure that the funds are spent on those
most in need?

Mr. Crawrorb. I think you would have to look at that on a block
grant by block grant basis. I think in terms of—that is, that issue
of accountability—what level of guidance would you want to offer.

T am not familiar with the welfare reform, but if you were to take
the matter of, let’s say, job training, perhaps the kinds of things
that you would want to know from a job training standpoint would
be: who was being served; what kinds of services did they receive;
what kinds of jobs did they receive as a result; and what wage,
those kinds of things having common data, but it is something that
the Congress will have to work through on each of its block grants,
and maybe one of the things that you would want to look at is, look
at the Federal contribution. In the training area, the Federal con-
tribution is close to 100 percent; in other areas, maybe in edu-
cation, the Federal contribution is at 5 percent, 8, 9 percent. Maybe
there is some flexibility there.

Mr. Towns. Yes, Mr. Masten.

Mr. MASTEN. Mr. Towns, I agree with everything Mr. Crawford
has said. I think, to get right to the core of your question, there
is a need to require that the States set some form of criteria for
performance measures and for accountability in order to ensure
that the program is doing what it is intended and that there is ade-
quate data for the return on the investment.

Mr. Towns. Let me ask you, as we look at this whole problem
in terms of welfare reform of course, and now we are dealing in
terms of labor and cutbacks and all of that, I must admit that I
become extremely concerned when I look at just cutting everything
all at once in such a draconian kind of fashion. Have you had any
conversations with the IG in terms—over at HHS and the Welfare
Department in terms of—that basically looks at welfare reforms
and handles these kinds of issues in terms of fraud and abuse in
those areas?

Mr. MASTEN. I have not. In my capacity as IG, no, I have not
done that. But in making recommendations on certain programs, as
I have put in my testimony, I am not really recommending cuts
with an axe. There are precise concerns that we have, based on the
results of our audits.

For example, with Job Corps, we specifically pointed out that
what we are really interested in is that before any more money is


36

We combined those two into one committee of Congress. You have
job programs in the Department of Education; you have job pro-
grams in the Department of Labor. It seems to me that what we’re
talking about is that skills matter more than anything else for em-
ployment. And you've made a very clear statement that income is
related to education. And so it ties in so neatly, to me, about the
value of having these two departments closely coordinated, if not
becoming one.

I know you can’t put things in little boxes, but I just wonder if

ou can elaborate a little more on why it wouldn’t be a good idea.
mean, I could see a single department with you running it, and
I would be very comfortable—.

Mr. REIcu. Well, in that case, Mr. Chairman—{Laughter.] No, let
me—I don’t want to state once again the points I’ve already stated,
but let me add one additional point. The Education Department, as
you know, used to be part of HHS—it was the Department of
Health, Education, Welfare; before that, the Education Department
was part of another department. The Labor Department started
out as part of the Commerce Department, or I should say, the Com-
merce Department started out as part of the Labor Department.

These departments have moved. from place to place. There is a
logical connection between Labor and Commerce. There’s a logical
connection between Education and Health and Human Services.
There is, indeed, a logical connection between both of them and a
lot of what HUD does, with regard to communities and community
development in central cities.

Mr. SHays. You didn’t bring up—

Mr. REICH. My point, if—I'm sorry, if I could just end the point,
and that is only that, conceptually, the—every department has
something to do with most other departments; even the Defense
Department has a lot of training and education programs. We've
been working very, very closely with them. The question is, what
is the central mission of each of these departments?

Mr. Suays. Right.

Mr. Reicu. And I would stipulate that there is something dif-
ferent about a central mission of a department of the American
work force—the Labor Department—in terms of adults, adult train-
ing, adult jobs, adult work force development, adult job protection;
and something quite distinct between that and other departments
and other missions. Although we work very closely with other de-
partments.

Mr. Says. Let me just say, I think you make a very concrete
and strong case that while there are connections with a lot of dif-
ferent departments, your presentation could be given by the Edu-
cation Department or by the Department of Labor. They are very
married together.

When I read the JTPA Title 2C program for disadvantaged
youth, it talks about the whole issue of citizenship and skills. at

’m thinking is that we’re learning that education happens now
when you're an adult, whereas before, you went to college and you
were done. And we know the Department of Labor is getting in-
volved in youth programs. So I just want to tell you that I am con-
ceptually very comfortable with the departments being put to-
gether.


48

U8. DEPARTMENT OF LABOR REINVENTION AND STREAMLINING

Streamlining—Progress on National Performance Review Goals of Reducing Staff
Levels and Redirecting Resources to Front-Line and Customer Service Positions
Employment down 1,088 since Jan 1993
« FTE reductions exceed targets in 1993 and 1994
* Senior-level positions reduced by 116 since 1993,
Headquarters positions reduced 242 since 1993
* Control positions reduced by 91 since 1993
Reinvention “Highlights Improvements | in| Customer Service, Employee
Empowerment, Cutting Red Tape & Getting Back to Basics
Bureau of Labor Statistics Improves Timeliness of CPI Information
Occupational Safety and Health Administration's Maine 200 Program
Employment and Training Administration's Boeing Re-employment Project
* Pension and Welfare Benefits Administration Case Processing Backlog Re-

juce:

* Office of Workers’ Compensation Programs Streamlines Its Claims Review
se8

* Pension Benefit Guaranty Corporation's Missing Participant Outreach Pro-

gram
Seven “Hammer Awards” from Vice-President Gore—the most to any agency

Mr. SHAyS. Well, thank you for coming. And this hearing is ad-
journed.

[Whereupon, at 3:10 p.m., the subcommittee was adjourned, sub-
ject to the call of the Chair.]

[Additional information submitted for the hearing is as follows.
Due to high printing costs this information can be found in sub-

committee files.]
1. US. DOL FY 1996 Budget Briefing, Major Initiatives.
2. U.S. DOL FY 1996 Budget.
3. CRS Report for Congress, Job Training: Proposed Rescissions.


53

The practice of this committee is to swear in all of our witnesses,
and if all three of you would stand—I’m going to encourage you to
stand as well. Thank you.

[Witnesses sworn.]

Mr. SHays. Great. Nice to have you here.

Mr. Souder, do you have a statement you would like to make?

Mr. SoupER. No, thank you, Mr. Chairman.

Mr. Suays. OK. It is nice to have you here in the committee and
here today for the hearing.

We are joined by Charles Masten, who is the Inspector General
for the Us. Department of Labor—it is nice to have you here—also
Clarence Crawtord who is the Associate Director of Education and
Employment with the GAO’s office—and I find it interesting that

ou combine education and labor—and we are also joined by Joe

‘isch, Assistant Inspector General. Nice to have you here as well.

Gentlemen, it would probably be helpful for you to summarize
your testimony, but I do want to make sure though that we get the
whole gist of your comments, so just feel free to give your testi-
mony as you would like.

Mr. Masten, we will start with you.

STATEMENT OF CHARLES C. MASTEN, INSPECTOR GENERAL,
U.S. DEPARTMENT OF LABOR, ACCOMPANIED BY JOE FISCH,
ASSISTANT INSPECTOR GENERAL FOR AUDIT; AND CLAR-
ENCE C. CRAWFORD, ASSOCIATE DIRECTOR, EDUCATION
AND EMPLOYMENT ISSUES, HEALTH, EDUCATION, AND
HUMAN SERVICES DIVISION, U.S. GENERAL ACCOUNTING

ICE

Mr. MASTEN. Good morning. Thank you, Mr. Chairman and
members of the subcommittee. Thank you for inviting me to appear
before you in my capacity as Inspector General of the U.S. Depart-
ment of Labor. I am accompanied by Mr. Fisch, as you stated, Mr.
Chairman. He is our Assistant Inspector General in charge of our
Office of Audit.

Before I get into summarizing my statement, I would like to
state for the record that my comments here will be in my capacity
as the Inspector General and may not be the official position of the
Department of Labor.

Mr. Suays. Is that intended as a joke?

Mr. MASTEN. No, no, that is not a joke. If you notice in my testi-
mony, that is a comment I put on the record.

Mr. Chairman, there is much discussion at all levels on the need
to reform the employment and training system of which Job Train-
ing Partnership Act, JTPA, is the centerpiece. One of our main con-
cerns with respect to JTPA is that the Department still has not in-
stituted outcomes-based performance measures to show the return
on investment for the JTPA Program. Although the current per-
formance measures have come a long way since the early days of
JTPA, they still do not get to the fundamental issues of long-term
economic self-sufficiency, increased employment and earnings, re-
duction in welfare dependency, and increased educational attain-
ment and occupational skills as required by statute. Without such
measures, the effectiveness of JTPA, which received a fiscal year
1995 appropriation of over $5 billion, cannot be properly evaluated.


OVERSIGHT HEARING ON THE DEPARTMENT
OF LABOR

TUESDAY, APRIL 4, 1995

House OF REPRESENTATIVES,
SUBCOMMITTEE ON HUMAN RESOURCES AND
INTERGOVERNMENTAL RELATIONS,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Washington, DC.

The subcommittee met, pursuant to notice, at 10:10 a.m., in room
2247, Rayburn House Office Building, Hon. Christopher Shays
(chairman of the subcommittee) presiding.

Present: Representatives Shays, Souder, Chrysler, Scarborough,
Towns, Barrett, and Green.

Staff present: Lawrence J. Halloran, staff director and counsel;
Christopher Allred, professional staff; Thomas M. Costa, clerk; Liz
Campbell, minority staff assistant; and Cheryl Phelps, minority
professional staff.

Mr. Suays. I would like to call this hearing to order, to welcome
our witnesses, to welcome our ranking member, and to welcome
our guests as well.

The purpose of today’s oversight hearing is to examine opportuni-
ties for cost savings within the Department of Labor with an em-
phasis on waste, fraud, abuse, and also mismanagement. We also
will discuss possible cost reductions through consolidation or elimi-
nation of a multitude of employment training programs.

This is the second hearing we have had regarding the Depart-
ment of Labor. The first hearing was on March 9, and our only wit-
ness then was Secretary of Labor Robert Reich. His testimony in-
cluded a discussion of DOL’s missions and his plans for streamlin-
ing the Department.

consider this a hearing on oversight that will help this commit-
tee begin to focus its time and attention on the Department of
Labor. We are going to try to get into specifics obviously, but we
are going to try to get a taste today of where we should focus our
time and energy. It is very likely that we will call our first two wit-
nesses back again when we then highlight one particular part that
we want to focus in on.

We are anticipating hearing testimony about the Job Training
Partnership Act. According to the Office of Inspector General, the
JTPA program is vulnerable to fraud and lacks accountability. We
also anticipate focusing discussion on the Targeted Jobs Tax Cred-
it, which offers tax incentives to corporations for hiring the dis-
advantaged. I’m fascinated by the nationwide audit of the program,

(49)


78

abuse problems, and the training folks are not really up to speed
with dealing with this type of person today. I mean to train some-
one to do something is one thing, but to deal with all the other bag-
gage that a lot of these people come with is an entirely different
problem.

Mr. CrawForD. One thing I would add on the accountability
piece, the outcomes, I think in addition to having good performance
standards, if you look at JTPA’s performance standards today they
are pretty good. They place—about 70 percent of their people com-
plete and get jobs.

What the problem is and what is needed is more of what we
would call an effectiveness review; in other words, look at what
happens to a person that goes to JTPA and compare that to the
person that looks similar to that JTPA person but doesn’t go
through the program, and that is when you find the modest gains
in terms of income and employability. There is not much there, and
I agree, many of these people do need the basic education, and that
is a starting point.

Mr. Suays. I thank the gentleman.

I neglected to point out we are also joined by Tom Barrett from
Wisconsin. I apologize to the gentleman.

Do either of you have statements you want to make, or shall we
just go with the questions.

Mr. BARRETT. Just the questions, Mr. Chairman.

Mr. Suays. All right. We will go with your questions.

Mr. Barrett.

Mr. BARRETT. Perhaps you can help me—and I’m sorry I came
a little late—with the graph on the left there.

Mr. Suays. It is a thermometer.

Mr. BARRETT. What was the purpose for having that here?

Mr. CRAWFORD. What we were showing was—it was in the con-
text of understanding the Labor Department’s role. It has two
central roles. One is in workplace development—worker protection,
and that includes the workplace regulation there, and the other
one is in the job training worker development.

Mr. BaRRETT. Are some of these going to collapse together? Is
that what you are suggesting, or is this just to give you sort of —

Mr. CRAWFORD. We are suggesting the same kind of look that we
have given to job training is probably merited in the area of work-
place protections, and if I can just add, Congressman, when we
went out and spoke with businesses, small and large, one of the
messages that we came back with was, we don’t know right now
whether we are in compliance with all the rules that we are sup-
posed to, and we are not even quite sure what all the rules are.

Mr. BARRETT. I’m going to ask you sort of an odd question. Could
you quickly just run through what they all stand for?

Mr. CRAWFORD. Sure, and in fact what we also have in the testi-
mony there for you—let me find the page—on page 5, we have
the—of our testimony, I would be happy to run down that list.

Mr. BARRETT. That is OK.

Mr. Crawrorp. OK. Page 5 of the testimony, and also at the
very end of the testimony beginning on page 12, we have a little
on what each of these regulations is supposed to accomplish, and


88

That concludes my oral statement. We will be happy to answer
any questions.

Thank you.
1 (The prepared statement of Ms. Pindus and Ms. Nightingale fol-
lows:

PREPARED STATEMENT OF NANCY PINDUS AND DEMETRA SMITH NIGHTINGALE, URBAN
INSTITUTE

INTRODUCTION *

The recent focus on redesigning government programs to be more responsive to
the needs of their customers has encouraged jnitiatives to improve program effi
ciency. A related concern is whether, and by how much, consolidation of federal
funding streams would result in cost savings. This is a complicated issue, requiring
careful examination of current and future variations across programs in terms of op-
erations, management, inter-program coordination, and fiscal reporting and budget-

ing.
Fhe Urban Institute has completed a preliminary study for the U.S. Department
of Labor to identify potential administrative savings that might be expected from
various program consolidation models, The conclusions presented are considered
preliminary and tentative, mainly because of data limitations and differences in
definitions across programs, For example, while most programs maintain data on
administrative costs, the definitions of what activities are included in the adminis-
trative versus direct cost category vary. By sharing our findings with you today, we
hope to provide an understanding of the conceptual framework and operating as-
sumptions that can be used to further examine this complex issue.
At all levels of government, increased attention has been paid to the benefits of
rogram coordination and/or consolidation. There has been a proliferation of service
integration models for employment and training beginning in the 1980s, coupled
with a belief that, at least from a service delivery perspective, integrated programs
are desirable. To date, much of the initiative for consolidating public programs has
been taken at the state and local level. When state and local administrators and
staff are asked about coordination, one of the main messages they send forth is that
federal funding provisions and regulations are a barrier to effective coordination and
integration of services. Several new federal initiatives by the Department of Labor
and the Department of Education are designed to remove some of those barriers and
encourage more integration. One-Stop Career Centers for employment, training, and
education services have already been initiated, and more state and local efforts are
expected in the next few years. Other agencies are similarly interested in removing
federal barriers to integration, as evidenced through initiatives such as the Services
Integration Demonstrations at the Department of Health and Human Services
(HHS), the Welfare Simplification efforts at HHS and the Department of Agri-
culture, and the welfare reform waiver process authorized under Section 1115 of the
ial Security Act.
A logical next step, then, to improve service efficiency, might be to formally con-
solidate federal funding streams along with federal regulations related to areas such
program reporting cycles, definitions, planning requirements, and fiscal monitor-
g. The block grant concept is one way to consolidate funding streams by “devolv-
ing’ authority from the national government to the states or localities. Other con-
solidation models might include a more directive role for the national government
to assure consistent attention to specific objectives.

CONCEPTUAL ISSUES

There are a number of conceptual issues that come to mind in considering the po-
tential savings that might result, from consolidating programs. First, the policy deci-
sion about whether to consolidate or not should, ideally, begin with an assessment
of the overall value of each program: Does it make sense to consolidate various ex-
isting programs? Does each program have a clear purpose and mandate? Are the
existing mandates and objectives of individual programs compatible with, duplica-
tive of, or inconsistent. with other programs? Such issues should be addressed before
decisions are made about consolidation.

ond, there are undoubtedly some economies of scale associated with consolida-
tion. If two or more programs share space, equipment, computers, and the like, costs

‘The following views are those of the authors and are not to be attributed to the Department
of Labor or to the Urban Institute, its officers, trustees, or sponsors.


43

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CONTENTS

Page
Hearing held on:
March 9, 1995
April 4, 1995
Statement of:
Masten, Charles C., Inspector General, U.S. Department of Labor, accom-
panied by Joe Fisch, Assistant Inspector General for Audit and Clar-
ence C. Crawford, Associate Director, Education and Employment Is-
Sues, Health; Bdvcation and Homan Somiess Division, ES General
pyhgeounting Office ..
Pindus, Nancy, Urban Institute, accompanied by Demetra Smith Nightin-
ale, ‘Urban Institute; and Burt S. Barnow, principal research scientist,
stitute for Policy Studies, Johns Hopkins University
Reich, Robert, Secret Labor
Letters, statements, etc., submitted for. ‘the record by:
Barnow, Burt 8, Principal Research Scientist, Institute for Policy Stud-

49

53

ies, Johns Hopkins University, prepared statement of . 94
Crawford, Clarence C., Associate Director, Education and Employment
Issues, Health, Education, and Human Services Division, U.S. General
Accounting Office, prepared statement of .. 62
Fisch, Joe, Assistant Inspector General for Audit, information concerning
ETA grants .. 79
Green, Hon. Gene, a ve in Congress from the State of Texas,
prepared statements of 29, 52
Masten, Charles C., Inspect
pared statement o} 55
Morella, Hon. Consta: es
of Maryland, prepared statement of 26
Pindus, Nancy, and Demetra Smith
pared statement of 88
Reich, Robert, Secretary of Labor:
Information concerning grants to labor unions and public interest
31
Preps repared statement of 37
Shays, Hon. Christopher, a Representative in Congress from the State
of Connecticut, prepared statement of .. 2, 50
Towns, Hon. Edolphus, a Representative in Congress from the State
of New York, prepared statement of ... a 3,51

(mt)


106

Ms. NIGHTINGALE. Right.

Mr. Suays. So you are actually saying there might be increased
costs.

Ms. NIGHTINGALE. In the short run.

Mr. Says. That is almost a killer, unfortunately, in this envi-
ronment.

Ms. NIGHTINGALE. I think Iowa has some estimates of their pro-
jections on how long it will take them to recoup their up-front in-
vestments. What was it? Seven years?

Ms. PINDUS. Yes, 7 years is what their projections are, and they
still don’t have that much back in the way of cost data.

Ms. NIGHTINGALE. Before they would break even.

Mr. Suays. We kind of covered the waterfront with our two pre-
vious witnesses, so it may more apply to Mr. Barnow, my question,
I feel like a kid in a candy store in one sense. I mean wherever
you go, you have got something you can consume here.

If you were in our shoes, where would you put the primary focus
in terms of the reduction of waste, fraud, abuse? What area seems
to cry out for attention more than others? Because I think a lot of
areas cry out for attention.

Mr. BaRNow. I have to say I’m not an expert on waste, fraud,
and abuse, I’m sorry.

Mr. SHAYs. You worked for the Department?

Mr. BaRNow,. Pardon?

Mr. SHays. You worked for the Department? That is not comfort-

ing.

Sir, BaRNow. Well, that was a long time ago.

Mr. SHays. Well, use your general intelligence and tell me what
programs do you think, just when you were there. I mean I can just
tell you, candidly, I have a friend who ended up buying a house
from someone who worked for the Department of Labor, and he
had renovated the downstairs and the basement and put in a kitch-
en and put in an apartment. He did it on Government time. He
went to work at 10, read the newspaper for 2 hours, and at 12 he
went and worked—came back. Now this was just one example, and
maybe it was a total vignette—I mean a totally isolated example.
But I got the sense that he was—the administration simply didn’t
believe in his task so they didn’t give him any responsibility.

Mr. BaRNow. That is a broader Government-wide question. At
one point when I got a new job I had four secretaries and I even
did my own typing, so I mean I didn’t know what to do, so I didn’t
promote them, and one by one they left. But those days I think are
pretty much gone. They have been reinventing like crazy over
there, if that is the right term, and a lot of—I think they are actu-
ally ahead of schedule on the staff reductions. So in that particular
area there may still be some people who are not carrying their
load, and there is no question there were people like that then and
it was very difficult. I mean you could do it, but it was very dif-
ficult to discipline people who were what we used to call retired on
the job. So that was a problem. Now I go over there and there has
been such drastic cuts in a number of areas that a lot of the people
are working very long days.

Mr. Suays. That is why we do some cutting, sir, to try to get at
those who are retired on the job.


GAO Workplace Regulation

Statutes
1920
| -e———_ RLA
1930
DBA NLRA
WHA — FLSA ve
1940 ES&S} — VAR
1950 [pres
1960 F CWHSSA
EO 11246
1970 felt OSHA MSHA
RA___ ERISA
STAA
1980
[e+ MSPA
-eo-+—________—— COBRA
. feeo}+—_——__ EPPA IRCA
1990 ADA DFWA

FMLA WARN

2000



52

For example, we all know that the opportu: available to low-skilled workers
are in rapid decline. Manufacturing and production jobs which were once a wage-
earner’s leg up into the middle-class, are moving off-shore to low-wage economies.

Can we agree that if we are to stabilize and increase our middle-class, this nation
must produce jobs and a workforce to fill them? Can we agree that we cannot get
people off welfare and into jobs without effective job training programs? Can we also
agree that if we are to maintain our competitive advantage globally, we must re-
train that workforce to meet the higher skilled, high-wage job opportunities?

Then clearly, initiatives that arbitrarily cut employment and training programs
are ill-advised and counterproductive, and should be discarded.

Mr. Chairman, I am convinced that the solution is out there somewhere, and I
am equally convinced that we must work together—Republicans and Democrats, the
Congress and the administration—to find it. A first step, however, must be to find
some common .

Toward that end, I look forward to the testimony of our witnesses and welcome
any recommendations they may have.

PREPARED STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN CONGRESS:
FROM THE STATE OF TEXAS.

Thank you, Mr. Chairman. I appreciate the opportunity to dig deeper into each
federal agency and find out how effective our federal programs truly are. In the
hearings we have held thus far, we have noted the overlap of several program with-
in agencies and between them. Not all the programs are run effectively, and many
of them are subject to abuse.

The key is to decide which Programs must go and which ones should stay. Some
programs may be effective beyond the price tag that they bring and serve goals that
should be served. Two programs in particular, the summer jobs program and the
Davis-Bacon Act may be two of those kinds of programs.

I believe we should consider which goals we want to promote and what may be
best for society as a whole and not just look at narrow criteria such as cost without
recognizing the context in which these programs are taking place.
ot look forward to exploring these ideas with today’s panelists. Thank you, Mr.

airman.

Mr. Suays. I thank the gentleman.

Mr. Chrysler. Do you have a statement?

Mr. CHRYSLER. Yes, Mr. Chairman, I appreciate this opportunity
to ask questions of this distinguished board.

You know, it is my belief that the solutions that we are looking
for, certainly that my distinguished colleagues ask for, should real-
ly come from you, because you are the ones that are on the front
lines of this issue, you are the ones out there talking to these peo-
ple and listening to their issues, and they really do need to come
from you. However we need our Federal Departments of Govern-
ment to come to these committees and certainly come to Congress
with those solutions. They can say to everyone in Congress that
this is the way we need to conduct business, these are the things
that we need to do to give the best service possible to our constitu-
ents, our customers, and certainly this is the way we can do it in
the most cost-effective way.

So I believe that each and every hearing like this or each and
every year that you would come through with more and better solu-
tions and more cost-effective ways so that the American taxpayers
can get a better bang for their buck, we can get better solutions
for the people that truly need it, and they really need to come from
you.

Thank you.

Mr. Snays. I thank the gentleman.


101

with a—a change in sort of the mission and the statements that
come out of the Federal Government are just as important as the
performance standards, and that with leadership and direction
about what the intent of the programs are, that plus technical as-
sistance and capacity development could shift sort of what the ob-
jectives of the block grants are.

Mr. Towns. Fine.

Thank you, Mr. Chairman. I know my time has expired.

Mr. Suays. I thank the gentleman.

Mr. Scarborough has joined us for your testimony and has ques-
tions.

Mr. SCARBOROUGH. Thank you, Mr. Chairman.

I certainly appreciate you all having this important hearing, and
I appreciate your testimony today. Let me ask you a question
though. I was intrigued by comments saying that, in effect, these
job training programs are so important, we Fave to have the Fed-
eral Government involved and, in fact, in some areas even gettin;
more involved, and that it can’t be trusted to the States or handle:
by the States, and ’'m intrigued by that when GAO states our work
has demonstrated that the Federal Government’s patchwork of pro-
grams is characterized by overlap, duplication, wasted resources,
and poor service quality, and creates confusion for clients, employ-
ers, and administrators. Additionally, many agencies do not know
if their programs actually help people get jobs. Thus, the effective-
ness of these programs is also in question.

And you balance that with the successes that the State of Iowa
has had in successfully integrating employment and training pro-
grams together, and it certainly begs the question to be asked, if
the Federal Government is the only one that can be trusted with
this, then aren’t we in pretty bad shape?

Ms. NIGHTINGALE. I would think that we have to trust everybody
at the Federal level, State level, and the local level, and Iowa is
to be commended for the work that they are doing, but even lowa—
and I think in our statement we say this—acknowledges that they
are—they are investing a lot of money to improve their program,
and it is that commitment, that political and public commitment to
Program improvement, that is needed at the State and at the Fed-
eral level, but it is not one that is costless, and Iowa is an example
where they are investing substantial amounts of money on tech-
nical improvements, on data systems, on retraining staff, and on
streamlining the entire service delivery system, which is exactly
what we are talking about that is needed. Whether it is a Federal
program, or State program, we still need that same kind of tech-
nical improvements.

Mr. BARNowW. I would add that if the Federal Government is pay-
ing for some of the trainin, Programs, then it has a responsibility
to the taxpayers to try ‘and see how well they are doing, and the
fact that they may not be doing it in all the programs now doesn’t
mean we can’t do a better job.

I think in my testimony I pointed out that in some programs, in
the Job Training Partnership Act, they are tracking the clients,
they are doing the evaluations, and so we do have a feeling of how
well the program is performing, and I believe Mr. Crawford’s com-
ments apply to other programs than the main line JTPA program.


26

advantaged young People" 1.2 million young people, disadvantaged
young people, will not have any opportunity to work.

These are kids who want to work, desperately, during the sum-
mer. Again, it may save some money in the short term. In the long
term, society will pay the price.

Ms. MoRELLA. The Women and Apprentices Program is only like
$744,000, so it’s a small amount. And since it’s working well—and
I understand what you're saying about the summer jobs program,
and I agree with you—but I am hoping that you will do what you
can to continue with that program as you do your consolidating.
There are a lot of people relying on it. It has helped an awful lot
of employers.

I wanted to just briefly also indicate, I’d be happy to work with
you, too, as I know this committee will, and was already men-
tioned, your Targeted Jobs Tax Credit—I think it’s a very impor-
tant element that has expired. And I hope that we'll be able to put
something together in that regard also.

Mr. REICH. Yes, Congresswoman, I said before—I’m not sure you
were here at the time—

Ms. More ta. I think I heard you respond to the question that
you'd be happy to work with us, is that it?

Mr. REICH. Yes, in fact, I’m eager to work with you to make that
program work. Right now, I have some problems with it because
the evidence we have suggests in its present form, it is not work-
ing.

Mr. Suays. If the gentlelady wouldn’t mind, I’m going to ask Mr.
Green be given 5 minutes and then we'll give Mr. Chrysler 5 min-
utes.

Ms. MorELLA. Absolutely.

Mr. Suays. And Mr. Barrett is leaving now to see if he can come
back and ask you some questions. Mr. Green, you have the floor
for 5 minutes here.

Mr. GREEN. Thank you, Mr. Chairman. If my colleague from
Maryland has finished, I—have you finished?

Ms. MorELLA. I have finished, and if I might also submit some
questions to you, Secretary Reich.

Mr. ReIcH. Oh, sure. And by the way, I’m very gratified to hear
that you agree with me on summer jobs. I hope you persuade many
of your colleagues.

is. MORELLA. I wish I had a magic wand for a lot of things.
Thank you, Mr. Green.
(The prepared statement of Hon. Constance Morella follows:]

PREPARED STATEMENT OF Hon. CONSTANCE MORELLA, A REPRESENTATIVE IN
Concress FROM THE STATE OF MARYLAND

I would like to commend you, Mr. Chairman, for holding this important oversight
hearing regarding the Department of Labor (DOL). I also welcome Secretary Reich
and extend my appreciation for his willingness to enlighten me and other members
of the Subcommittee about the important role of the DOL and efforts to make the
Department even more effective and efficient.

¢ Department of Labor plays an essential role in helping American workers
face the needs of a changing economy. Dramatic changes are occurring in the mar-
ketplace. Rapidly-evolving technologies, corporate restructuring and global competi-
tion all contribute to the challenges facing today’s American workforce. Technology
changes demand that workers develop the skills to match the needs of an ever-
changing workplace. We must constantly improve training and retraining services
to help Americans get better jobs and to help America prosper in a global economy.


22

the penalties associated with hiring illegal aliens for the sake of
getting ve people who will be willing to work for extremely low
rages inside the United States in squalid working conditions.

d if we can target those industries, those cities and those em-
ployers and enforce the laws as they are already on the books, in
terms of minimum wages and working conditions, we can demag-
netize that magnet for undocumented aliens in what I consider to
be a very humane way of dealing with the problem. And the Presi-
dent agrees.

Mr. RTINI. Then if I’m reading your last comment, your an-
swer to my question correctly, you’re saying the increase in the re-
quest in the budget is largely due to the GI. bill for American
workers and this new initiative on immigration enforcement.

Mr. REICH. Not entirely. We also are requesting additional, some
additional FTEs for compliance assistance. What we're trying to do
in the regulation and enforcement area—again, the context here is
6 million work places. We have 93 million workers covered by these
employment laws. The number of workers is going up every day.
What we are trying to do is provide employers with more and bet-
ter assistance in preventing accidents and illnesses and pension
problems and minimum wage and working and hours and other
violations before they occur.

We call that compliance assistance. Actually, it’s something that
businesses appreciate a great deal. We are shifting resources in
that direction, but we also have to maintain with that many work-
places, realistic enforcement authority as well, and that’s why we
are seeking additional compliance assistance. But again, the major-
ity of those FTEs will go toward that immigration effort, which fo-
cuses on minimum wages, working conditions; an effort to root out
sweatshops and sweatshop conditions.

Mr. MarTINI. In consolidating the—I see, if I’m correct in reading
some of the statistics, you reduce approximately 163 programs to
70 programs and the next step will be to try to consolidate those
70 programs into four areas of programs, is that correct?

Mr. REICH. Well, that’s roughly correct.

Mr. MarrTINI. I’m looking at your chart, and let me just, if I may,
just follow through. Just getting a glance at all the programs that
are out there, and one of the problems out there, having served just
for a couple of years on a county commission level of government,
one of the major problems with all of the Federal Government pro-
grams is understanding which ones are for which, and how to find
out what’s out there. So your effort to try to consolidate them is
one that I applaud.

But it would seem to me that in looking at those 70 programs,
aren’t they duplicitous with what is being proposed in the CL bill
for America’s workers, and therefore, why do we need to spend—
have a bigger budget request for the two programs, which if we’re
really serious about streamlining government and cutting spending
in government, I see an increase request of $4.8 billion and an in-
crease in employees when I think the sentiment of the Congress
today is to try to find areas where we can reduce government,
streamline, make them more effective.

And that’s what most of the language is in your proposals about.
flexibility, streamlining, consolidating, avoiding duplicity. And then


105

participants, and they were able to basically make their money go
further to serve more people.

Mr. Towns. All right, and I agree with you wholeheartedly, but
let me just ask you another question. How does a person like this
Member get this across to his colleagues that this is the way—I
mean, could you help me with that, because I agree with you
wholeheartedly and I think you are so right, but it is just so dif-
ficult to convey that message. And I think you were here when I
made the point earlier that what we will do is cut $2.3 billion from
over here and then all of a sudden the Bureau of Prisons will come
in and demand $2.3 billion and we will have to give it, and there
is no doubt about it, and I just say to you that is not a solution
to the problem.

Mr. SHAYs. You don’t have to answer that. [Laughter.]

Mr. Towns. Can you sort of help me with that a little bit?

Ms. NIGHTINGALE. One way you could do it—I mean one of the
ways we were able to do this study is, because we know what hap-
pens out in the field, we have done a lot of work around the coun-
try in different communities, and if you had local program adminis-
trators come here and speak and you asked them how they would
improve their system, and every one of them will say we need some
streamlining and consolidation to make our jobs easier. I think that
is where yeu can convince your colleagues of the value, because out
in the field in terms of the service delivery and the—where individ-
uals and employers are working, that is where the difference will
be made.

Mr. Towns. Right. ’'m embarrassed to ask this question, but I
want to make certain because it is on my mind and I can’t leave
this room without asking. Are you the same Nightingale in terms
of welfare reform, in terms of the articlh—

Ms. NIGHTINGALE. Yes.

Mr. Towns. OK. Thank you. I think that is something that ev-
erybody should read.

Thank you very much. I have no further questions.

Mr. SHAYS. You triggered a question. When I tried to summarize
what I thought your message was, that there would not be any real
cost savings but we would see enhanced programs, better pro-
grams, better delivery, and so on, I didn’t really delve into the
question why because it conceptually made sense to me, but what
I'm hearing come through is that you would have more partici-

ants.

p Ms. NIGHTINGALE. Well, you could either have more participants
or—

Mr. Suays. Because it is a better program.

Ms. NIGHTINGALE. Or a broader range of services, some of what
the previous panel talked about in terms of a variety of services,
better targeted services.

Mr. SHAYS. Well, you have made an incredible argument then for
consolidation. I mean it just shouts from the rooftops. It is not an
argument not to consolidate, it is an argument to consolidate but
don’t expect a lot of savings but—correct?

Ms. NIGHTINGALE, And that there may be up front investments
as well, so that it is not costless to consolidate.

Mr. SHays. Right, and so payback is long term.


34

tleman would be willing to risk missing his vote to ask you ques-
tions. We've been doing a lot of running today.

The Fentleman from Wisconsin, Mr. Barrett, you have the floor.

Mr. BARRETT. Thank you very much. As I was here the last time,
you were touching briefly on the recisions package. And if you
could help me a little bit, more specifically, I think you mentioned
dislocated workers, summer jobs. Obviously, this is a time when
we're going to have to prioritize; obviously, this is a time when
there are going to be cuts. Which, to you, are the ones that you
would least like to see happen, and why?

Mr. REICH. Well, as I mentioned before, I think it a terrible mis-
take to make cuts in areas where people otherwise could become
more productive. Now, the $1.7 billion which were cut out of sum-
mer jobs, to me, is a false economy, Congressman, because these
young people—young teenagers in disadvantaged areas, disadvan-
taged teenagers—often they face an implicit choice during the sum-
mer. They are either going to be heading down a road toward work
and jobs and education, or they're going to be heading down an-
other road; some of them are going to get into mischief.

And why in the world would we want to take money away from
opportunities for them to get jobs when they are willing and able
and eager to get a job. As I think I said before, last summer there
were two young disadvantaged people seeking a job in the summer
for every job slot we had available. And now suddenly, we have
eliminated those jobs altogether. I frankly don’t understand it. I
think that in this area of job training and work, generally, we are
making the most important investment society can make in our fu-
ture, in the ability of people to be productive.

Mr. BarreTT. I wasn’t in the hearings—what was the criticism
of the program? Why was it chosen?

Mr. REICH. Well, 1 apparently wasn’t in the hearings, either, be-
cause the Appropriations Subcommittee hearings that I attended,
the issue never came up. This is one thing that surprised me so
much. If an Appropriations Committee or Subcommittee is going to
exercise the kind of jurisdiction that an authorization committee
normally exercises in effectively eliminating a program, I would ex-
pect at the very least, that the Secretary who is responsible for
that program would have been given an opportunity to talk about
the benefits of that program. And there was not even that. This
happened, I am told, at 1 a.m., in the dead of night, without so
much as a question being asked of me as to the effectiveness of
that program.

Mr. BARRETT. What kind of jobs are these? I’m trying to figure
out where the criticism comes up. Are they make work jobs?

Mr. REICH. The Inspector General, the GAO, a separate consult-
ant firm called Westats, have all in recent years—in the past 3
years—looked at the summer jobs program. They have found those
jobs to be meaningful work experiences for these young people. In
fact, they have been very complimentary of the r Be artment
for how we're organizing that and how we tried to move those jobs
into a work and learning experience, so that they were combined
with some education, in many instances, for young people who oth-
erwise lose the learning by September that they tained by June or

lay.


58

jobs. The OIG found that the great majority of employers made their hiring deci-
sions even before determining an individual’s eligibility for TTC. We projected that
92 percent of the individuals for whom employers could have claimed a credit would
have been hired even without TJTC. In other words, although TJTC was intended
as a hiring incentive, the tax credit caused the employment of target group members
in only 8 percent of the cases. In addition, we estimated that the program's costs
exceeded its benefits by over $234 million over a 1-year period, resuming economic
benefits of just. 37 cents for each dollar of spending and foregone tax revenues.

Our, audit found TYTC jobs were largely entry-level, part-time, low-paying, low-
skilled positions. We found that:

© TJTC employment included jobs such as fry cooks, order takers, waiters/
waitresses, cashiers, retail clerks and maids/janitors—the same types of jobs in-
dividuals held both before and after their TJ employment;

« TJTC participants’ starting hourly wages averaged « only $4.96;
ee 1 of 3 employees was paid no more than the minimum wage required by
jaw;

2 of 3 employees worked part-time; and

© 2 of 3 employees were not offered any fringe benefits.

The data indicates that TJTC employment was usually in jobs for which no spe-
cial qualifications were needed or for which applicants already possessed requisite
skills. We also found that TJTC-covered employment was the first job for only 13
percent of the individuals we sampled,

The Joint Committee on Taxation estimated that TJTC resulted in expenditures
and lost federal tax revenues of nearly $300 million in 1994 alone. Despite this sub-
stantial cost, our results led us to conclude that TJTC is nothing more than a wind-
fall to employers. Accordingly, we recommended the Secretary encourage Congress
not to renew TJTC after its expiration on December 31, 1994.

In addition to our audit work, we have also conducted several criminal investiga-
tions in which we have identified fraud in the program, particularly falsification of
eligibility documents by contractors. We have found that at times contractors would
impersonate participants in telephone interviews with state employment security
agencies, and falsify and submit documents to the Government without the partici-
pants’ knowledge.

While the program expired December 31, 1994, we remain concerned because, in
the past, the program has been allowed to expire, but has then been reauthorized
retroactively. We are of the opinion that the high cost and ineffectiveness of this
program place it squarely on the list of programs that should be eliminated.

ALIEN CERTIFICATION USER FEES

The Office of Inspector General also has a long-standing concern that the Employ-
ment and Training Administration is not imposing sufficient user fees for processing
and issuing labor certifications for foreign workers. In a January 1991 OIG audit
report, we recommended that ETA institute full cost-recovery user charges for all
foreign labor certification programs. Federal agencies can implement full cost recov-
ery user charges by administrative action. We estimated at the time that costs of
$100 million could be recovered over a 3-year period through collection of fees from
employers requesting labor certifications from ETA. Although ETA agreed in prin-
ciple with our recommendation, no action has been taken to date. Moreover, since
our audit, ETA has assumed ‘responsibility for administering several additional
labor certification programs.

We continue to believe ETA should implement cost-recovery user charges to make
the foreign labor certification program self-sustaining and shift the cost to ite pri-
mary beneficiary—the employer.

e initiated an audit to determine the effectiveness of ETA’s
administration of its foreign labor certification and attestation programs. We expect
to report our results later this year.

NATIONAL DISCRETIONARY AND NONCOMPETITIVE GRANTS.

As you know, Mr. Chairman, DOL agencies fund numerous discretionary grants,
contracts and studies in the course of carrying out their program responsibilities.
In some cases, the award program itself may be at the discretion of the Secretary.
In other cases, there may be some discretion in how the program is carried out. For
example, the JTPA legislation permits—but does not require—the Secretary to
make grants to national organizations and public interest groups that have special
expertise in administering employment and training programs. Part of this money
is used for ETA’s Partnership grants. A large portion of these grants are awarded
on a sole source basis, with the balance awarded competitively to community-based


76

expended on increasing the number of centers, we think the most
effective and efficient way to proceed is to address the preblems
that we have already identified.

Mr. Towns. Yes, and I understand that and respect that, and I
think that is wise, but I was just wondering, in all the areas, has
there been this kind of communication between each other, because
what we are talking about here is—I mean it is major. I mean this
is not minor kinds of recommendations, you know, we are not
patching something, we are just going to tear it down and put it
back together, and I was just wondering, is everybody sort of talk-
ing to each other? That is what I am really concerned about. GAO
might be able to give me a better——

Mr. CRawForD. I think within our organization the division
which I am in is the division that also has responsibility for wel-
fare and some of the health care kinds of issues, and we do talk
about these. We have supported each other. We have looked at—
supported them in looking at the JOBS program and other pro-
grams, and we work very closely together.

You raise legitimate concerns that—with block eppnts, our posi-
tion has been that we just see block grants as a delivery strategy.
You could use any number of different ways to deliver money to
people, block grants probably just as good as any, they all have cer-
tain kinds of limitations, and, as the IG was saying, you have to
take into account, whichever strategy you use, what are the
strengths and weaknesses of that strategy and then put in place
the kinds of safeguards that assure that the money is being spent
in the way that the Congress intends.

Mr. Towns. My time has expired.

Mr. Suays. Thank you.

Mr. Souder, and I would just point out that we are joined by
Gene Green from Texas. I probably didn’t have to tell you he is
from Texas. You can always tell a Texan.

Mr. Souper. First, I wanted to make a comment on the work-
place regulation statutes. That is what happens when you have a
Congress full of attorneys and not people who run a business. As
somebody who has had a business, part of the reason you are get-
ting the negative reaction that you hear is, you just give up unless
you have enough money that you can hire a bunch of attorneys to
manage you through everything. You look at something like that,
and you just wait until somebody hits the door and hope you can
scramble and hope you have been close enough to the law, because
to follow the letter of every one of those laws or even to know what
was in it would break your company, it is impossible to function,
and if the Government really wants to bring the workplace more
into line they need to streamline and manage this better because
it is not workable for small or midsized businesses.

You need so many corporate attorneys, and even big companies
are split into little units who have very little time to figure out
whether they are following the letter of the law on that many stat-
utes as opposed to trying to make a profit for their company, and
it is just outrageous when you see it in chart form.

I wanted to get into the question a little bit of the block grants
but more directly related to the JTPA, where you said that there
should be or where you would need performance standards because


28

down, but we don’t even—we’re losing money we have already from
what we have. But let me talk about the general, overall, the block
grant proposal, and ask you a question about it.

There are some proposals here that we want to block grant ev-
erything-food stamps, whatever, and job training. And there’s a
bill that’s introduced by one of our colleagues that would block
grant the employment training programs. And I heard today, and

jokingly call it some of our throw-down Governors that come in
that talk about they want to block grant training programs to Wis-
consin or Michigan. Could you respond to some of the questions
about block granting, particularly training programs? I think if we
have a duplication now in the Federal level, I worry that if we have
50 States doing it, no telling what we may come up with; plus with
the verification and what they actually are doing.

Mr. REICH. Congressman, when we give State officials Federal
money and rely on State bureaucrats to do with Federal money
what Federal bureaucrats had been doing with Federal money, we
may sometimes get good results. But in the job training area, we
have tried before and we have not seen great results. The Job
Training Partnership Act was envisioned largely as a State block

ant Proposal. And over the past 15 years, 14 years, we have
earned that it doesn’t work that way. Congress has had to amend
it to provide more and more Federal guidance and guidelines.

We've been up and down the ladder of federalism in the job
training area. As I said before, with CETA and the Manpower De-
velopment and Training Act, we have seen that Federal bureau-
crats, State bureaucrats, local bureaucrats, job training works; it
makes a difference. But if we want to make a real difference in
people’s lives, our suggestion is to give people skill grants. Adults—
we're talking about adults now, who can make up their own deci-
sions about the kind of training they need, armed with good infor-
mation about what jobs are out there, what skills are in demand,
and what institutions are doing the best job preparing people for
those jobs and getting people those jobs.

That information can be computerized. We can use those one-
stop career centers, like in Houston, that are working terrificall
well around the country right now, and give people those skill
grants. They can make the market work; they can create a market
in job skills and in training, in job training, that’s better than any
set of bureaucratic guidance or guidelines.

Mr. GREEN. I guess the concern I have about block granting, and
I know that duplication of the programs, but in some of our States
and our local communities, we are actually combining these pro-
grams. They my come from Washington in separate grants, but
they’re actually being combined in the local community to serve,

uu know, unified instead of—they may be 100 and I don’t know

iow many different—150 Federal employment grants or job train-
ing employment grants, some of them are so small—but they are
also being combined in some of our one-step centers so we can ac-
cess them.

Mr. REICH. At the street level. In fact, I’ve said, and what we are
trying to create with our one-stop centers, as in Houston, is what
might be called street level consolidation. And individual doesn’t
care whether that particular funding source comes from one cat-


94

Thank you.
[The prepared statement of Mr. Barnow follows:]

PREPARED STATEMENT OF Burt S. BARNOW, PRINCIPAL RESEARCH SCIENTIST,
INSTITUTE FOR POLICY STUDIES, JOHNS HOPKINS UNIVERSITY

I would like to thank the Subcommittee on Human Resources and Intergovern-
mental Relations for providing me the opportunity to testify today on employment
and training programs. There are many issues before the Congress this year regard-
ing human resource programs, and the Congress will be making important decisions
shortly on how the nation’s human resource programs should be organized as well
as the level of support that should be provided. I would like to use this opportunity
to provide my observations based on research I have conducted as well as reviews
of the reports of the Inspector General, the General Accounting Office, and others.

I will first note a few areas where my interpretations differ from those of the Gen-
eral Accounting Office and the Office of the Inspector General. } will then turn to
the boarder areas of agreement with their findings and discuss the implications of
these findings. Finally, I will discuss how GAO and OIG reports, of abuse of a par-
ticular type of activity, on-the-job training (OJT) have resulted in too little use of
a strategy that is often effective.

INTERPRETING THE GENERAL ACCOUNTING OFFICE AND OFFICE OF THE INSPECTOR
GENERAL FINDINGS

Both the General Accounting Office and the Department of Labor's Office of the
Inspector General have done an excellent job of bringing to light issues of concern
regarding the nation’s employment and training system. Before addressing the
areas of agreement, I would like first to note some findings that I believe are subject
to possible misinterpretation.

Finding #1: There are 163 employment and training programs with substantial over-
lap among them.

While it would certainly be noteworthy if there were actually over 160 federal em-
ployment and training programs,,GAO’s count is more accurately of funding streams
rather than of actual programs. The Department of Labor's main training program
for economically disadvantaged adults, Title TI-A, is considered to be four separate
programs by GAO because the funding stream reserved for rewarding good perform-
ance is considered as a separate program, and so is the set-aside for older individ-
uals, which is usually, administered as part of the regular Title II-A program. When
Congress established Title II-C as a separate title for youth, three additional “pro-

ams” were created. The list also includes pilot programs, such as Youth Fair
Ehance, which is intended to test innovative or proniising strategies, as well as pro-
grams with only limited connection to employment and training, such as the Small

usiness Administration's eight programs for owners of small businesses.

There may well be too many programs, and I am not arguing that we need to re-
tain all the programs as they are currently constituted. My only point here is that
Congress does not need to worry about all 163 “programs” identified by GAO. In
a 1989 study for the Commission on Workforce Quality and Labor Market Effi-
ciency, my colleague Laudan Aron and I identified 14 major employment and train-
ing programs.! Department of Labor staff have estimated that 12 of the 163 pro-

‘ams account for about 75 ent of the expenditures. Also, Congress may have

ad good reasons for establishing special programs for target groups such as the el-
derly, migrants, refugees, Native Americans, and people with disabilities. The most
significant programs teday include JTPA programs for disadvantaged youth, adults,
and dislocated workers; the vocational education system; the food stamp employ:
ment and training progra and the Job Opportunities and Basic Skills training
program for AFDC recipients. I recommend that Congress focus its oversight on
these major programs rather than worrying about the myriad of smaller programs
in existence today.
Finding #2: Most agencies do not know if their programs are working effectively, and

Bains have been modest at best.

These statements were made by Mr. Clarence Crawford, Associate Director for

Education and Employment Issues for the General Accounting Office in his testi-

+ Burt S, Barnow and Laudan Y. Aron. “Survey of Government-Provided Training Programs,”
in Commission on Workforce Quality and Labor Market Efficiency. Investing in People: A Strai-
egy to Address America’s Workforce Crisis Background Papers, Vol. I, Washington, D.C.: US.
Department of Labor, 1989.


9

Mr. REICH. OK, if we could go to the next one, please. And there
are just a few more, and I'll get through these very quickly.

I want to go through the Department of Labor specifically, be-
cause this chart shows the number of employees in the Department.
of Labor, relative to the growth of the U.S. work force. As you can
see, in 1980, there were almost 24,000 employees in the Depart-
ment of Labor. Today we have a little bit more than 17,000. The
U.S. work force, during the same period, has gone from roughly 95
million workers up to 125 million workers.

My suggestion to you is that we have got to do, and are continu-
ing to do, a better and better job with the resources we have. Since
I’ve been Secretary of Labor, FTE has dropped by 1,000. And we're
going to continue to improve the quality of our services, provide
customers the best service we possibly can, and do it more and
more efficiently. Next, please.

Here we see staffing levels. Again, the Department of Labor, full-
time equivalent and relative US. employment. This is a slightly
different way of putting it, but the same chart.

I will get into the details with you, but these are our reinvention
savings that we are right now working at and developing—a 4-year
savings, $832.6 million. You can see for fiscal year 97, 98, 99 and
up to the year 2000, what we are aiming toward in terms of
reinvention savings.

Some of the benchmarks, as I said, employment down since Jan-
uary 1993, 1,088; FTE reductions exceed targets in 1993 and 1994;
senior level positions reduced by 116 since 1993. If we could just
stop at that for one moment and just say that like any large, effec-
tive organization, we have been pushing responsibility and we’ve
also been pushing responsibility outward to the field so that more
and more staff can actually be serving customers and not servin
bureaucrats. Headquarter positions reduced 242 since 1993; contro!
positions reduced by 91 since just 1993.

Some other highlights in terms of improving customer service—
the Bureau of Labor Statistics improves the timeliness of the
consumer CPI information. The Occupational Safety and Health
Administration’s Main 200 program—let me just stop there and
briefly explain that, and we can get into more detail. That’s a pro-
gram in which OSHA targeted those industries and employers with
the highest injury and death and illness rate, and basically said to
them, look, you can bring down your injury and illness rate if you
will set up management labor committees, train your employees
and come up with a health and safety program; and if you do that,
you don’t have to worry about inspections without complaints, you
don’t have to worry about nearly the amount of paperwork that you
have to do; in other words, if you accept a different kind of struc-
ture for preventing accidents before they occur, we want to encour-
age you to do that.

The net results of that have been extraordinarily positive—inju-
ries, illness rates, death rates down. We can give you more infor-
mation about that. I think this is a direction we would like to go
in in the future.

Also the Employment and Training Administration’s Boeing Re-
employment Project. I'll stop there for just half a second and just
say there, with regard to defense downsizing and also major cor-


17

we don’t really know whether they are working. Both of you kind
of address that in your testimony. What type of performance stand-
ards would you have?

For example, if it is employment it obviously has to just be more
than somebody got a job, because in your targeted jobs credit ques-
tion you said most of those people would have been employed any-
way. So what kind of standards could we put in that would actually
enable us to see whether or not the programs are working?

Mr. MasTEN. I think the standards should be really geared to-
ward the return on investment, and we just don’t have those in
place now. What are the taxpayers getting for their money? I think
this is the ultimate question that we need to answer with all of our
measurements.

Mr. Souper. So specifically by getting the return on the invest-
ment, would you measure whether they got placed in a job? How
would you measure whether they would fave gotten that job any-
way? The amount of time of training? What type of data would you
have to have, and where would we start to go with that?

Mr. MASTEN. I'll defer to Mr. Fisch.

Mr. FiscH. Congressman, when the JTPA law came off the Hill,
there was a requirement in there for program managers in the De-
partment of Labor to measure the return on investment, which in-
cluded the cost of training as compared to reduction in welfare ben-
efits, increased wages, et cetera. And the law was very specific and
very clear as to what should be measured, to see whether the train-
ing was effective and whether the jobs that the people got were
sustained over a period of time. I think it is something the Depart-
ment has not——

Mr. SoupeER. So you are saying there is not even a basic estimate
of how much it costs for each person?

Mr. FiscH. No. They know how much. They can pretty well tell
you the cost now. They measure people. In 13 weeks they go out
and look at a statistical sample of people 13 weeks out of the pro-
gram to see what their earnings are. However, there is no long-
term measurement as to the success of this program in place.

Mr. SoupeER. But back to the first part, you said that they need
to have a cost of training versus the cost of the benefits that those
people would have received had they not had it. Do they have that?

Mr. Fiscu. They have it, but they haven’t used it. They haven’t
put it out there in terms of measuring what the return on the in-
vestment was on the training.

Mr. Souper. So the primary thing they are missing is the long-
term data because they have the short-term data.

Mr. Fiscu. They have a short-term look, they do not have a long-
term look at these folks.

Mr. SoupeER. Is your feeling that there has been some, quote,
creaming like there has been in the targeted jobs credit?

Mr. FiscH. No. My guess is, from what we have seen and what
we have looked at, we would not say that there is any creaming
in the program.

I think to operate a training program today is one thing but to
start dealing with the training program and then deal with edu-
cation’s failures is another thing. I mean you are getting people in
the program today that have educational Yarriers: they have drug


83

surance schemes along the Mexican border. Has that been dealt
with to your satisfaction?

Mr. MASTEN. No, it has not, but the Department is still working
on it. There are a number of problems with respect to UI recipi-
ents. One of them is that I do not think that we are enforcing the
requirement that UI recipients must be in the United States or in
a country where a reciprocal agreement is held, that they be avail-
able and able to work.

Mr. SHays. You mean unemployment compensation would go to
non-American citizens living outside the United States?

Mr. MASTEN. Based on our investigative findings, that is what
has happened.

Mr. SHAyS. Legally? Is that legal? You can do a thumbs up or
thumbs down.

Ms. Horow!tTz. It was improper.

Mr. SHays. OK. How delicately stated.

For the record, can you repeat that? Mr. Masten, can you re-
spond to the question?

Mr. MASTEN. I will respond to that question. It is improper.

Mr. Says. OK.

Mr. MASTEN. To give you an example of how severe that problem
was, during one investigation, there were thousands of checks
going to a post office box and the owners of that post office box
would in turn get the checks, cash them, keep a portion of the
funds and then redistribute the rest to the recipients who were in
Mexico.

Mr. Suays. I see.

My time has ended.

Mr. Towns.

Mr. Towns. Thank you very much, Mr. Chairman.

The recision package slashes the current DOL budget by $2.3 bil-
lion and targets specific programs that are currently operational.
What impact will the recisions have on current operations? Can
they be implemented in a way that enables Labor to fully carry out
its mission? Anybody.

Mr. MAsTEN. Mr. Towns, as the IG, we have not looked at the
impact those recisions would have on the entire Department.

Mr. Crawrorb. We have not either.

Mr. Towns. The reason I raise this, you know, let me tell you
why I think it has great significance as we move to try to correct
a lot of wrongs and to make these programs much more effective,
and I think we should, but I don’t want to see a situation where
all of a sudden we cut. $3.2 billion out of Labor and then all of a
sudden the Bureau of Prisons comes in and asks for a $2.3 billion
increase, you know. That is hustling backwards, and I’m concerned
about this.

I think we need to make certain that we have enough resources
to do the kind of job that needs to be done to get to where we want
to go, and I think, we need to be very cautious and very careful
about how we do this, and I can’t stress that enough in terms of
welfare reform. I’m for it, think it should happen, but at the same
time we say people should go to work. At the same time, we are
talking about eliminating some programs, and some of these pro-
grams—or cutting some programs that have been effective, and


5

Now, people at the top, they saw their incomes increase by 18
percent. But you see everybody in between is struggling. The top
20 percent did very well. The next-to-the-bottom 20 percent, that
is the second from the bottom, they saw their incomes decrease
substantially, 8 percent. Even the people in the middle suffered a
3 percent decline in their incomes, adjusted for inflation. In other
words, if the period from 1950 to 1978 can be termed the period
of growing together, the period from 1979 to 1993 can be termed
the period of growing apart.

I submit, Mr. Chairman and members of this committee, this is
one of the most serious social problems this country faces, because
this trend toward more and more inequality, greater and greater
inequality, is not decreasing. In fact, if anything, it is accelerating.
We are growing apart at a remarkable rate.

The problem is not that the rich are getting richer. The problem
is that so many people are getting poorer. Next chart, please.

Why has this occurred? Why is there a widening gap between
people at the bottom and people at the top, and even people in the

iddle, who are seeing their wages over the last 15 years decline.
Much of it—not all of it, but much of it—has to do with the chart
that you are now taking a look at. Skills matter more.

This chart shows what has happened to incomes of people with
different levels of education and training. As you can see from this
chart, the top line, college graduates, they comprise roughly 25 per-
cent of the work force.

Their incomes, over the past 15 years, have been heading up-
ward. Not everyone, not every college graduate has enjoyed rising
incomes, obviously. There are many young college graduates today
who still find themselves living with their parents and still strug-
gling to find a job, or find a good job. I don’t mean to
overgeneralize, but on average, college graduates are doing better
and better. You see, they took a little bit of a hit in the last reces-
sion, but they’re back on an upward trajectory.

Compare them with everybod else: people who just have some
college; people who have only a high school degree; and people who
have less than a high school degree. In fact, if you look at 1979,
over on the left of the chart, you see that the gap between the high
school graduate and the 4-year college graduate was about 40 per-
cent. That is, the college graduate was earning, on average, 40 per-
cent more than the high school graduate.

Take a look at 1993, and by the way, if we had 1994, preliminai
indications are that these trends continue to widen. The gap is al-
most doubled. The college graduate, on average, is now earning 80
percent more than the graduate with only a high school degree.
gain, this doesn’t explain everything, but it does explain quite a
ot.

Technology and globalization, like a tidal wave, have engulfed
the American economy. Technology and globalization means that if
you have skills, if you have education, you are prepared to deal
with technology and globalization. If you don’t, these trends are not
your friend, they’re your enemies. If you do have skills and edu-
cation, these trends are on your side.

This is not to say that the answer is to hold back technology or
to hold back globalization. This is to simply state, as a matter of


81

Explanation of Recipient Choice: Services are available from only one responsible
source, and no substitute will suffice. The recipient has unique qualifications to per-
form the type of activities to be funded.

Percentage Spent on Administrative Costs: 26%.

Agency: Employment and Training Adminjstration (ETA), Office of Poliey and Re-
search.

Recipient Name/Address: National Alliance of Business, 1201 New York Avenue,
N.W., Washington, D.C. 20005.

‘Type: Grant.

Amount: $394,077.

Authority: DLMS 2-833(13)—one responsible source.

Purpose of Project: These grants will support participation and involvement of the
public sector in specific new initiatives involving national employment and training
programs—School-to-work, Skill Standards, and the strategy underlying the

employment Act of 1994.

Explanation of Recipient Choice: Services are available from only one responsible
source, and no substitute will suffice. The recipient has unique qualifications to per-
form the type of activities to be funded.

Percentage Spent on Administrative Costs: 26%.

Mr. CRAWFORD. Another example, Congressman Barrett, is the
Older Workers Program in the Department of Labor. They also are
noncompetitive discretionary grants, and the funding there, I be-
lieve, is—approaches $400 million.

Mr. SHays. $400 million nationwide—I'm sorry.

Mr. BARRETT. Go ahead.

Mr. CRAWFORD. Yes, sir.

Mr. SHays. $400 million per year?

Mr. CRAWForRD. Yes, in the CSEP Program, the Senior Citizens
Employment Pro; .

tT. BARRETT. Is that a decision that is made at the Department
level? You talked about some of these suggestions being made at
the appropriations level. Are either of those two suggestions that
were made at the appropriations level, or are those strictly within
the Department?

Mr. CRAWForD. I would have to research the CSEP Program to
answer that. I would be happy to do that and let you know.

Mr. BarreTT. If you could do that, I would appreciate it.

Mr. CRAWFORD. Sure.

Mr. BaRRETT. I have no further questions.

Mr. Suays. I thank the gentleman.

I would just like to follow up quickly on this. I am trying to es-
tablish a principle in my own mind. Mr. Crawford, let me just re-
spond first to your comment. On page 4 of your statement, you say
that when businesses work with the Department of Labor the men-
tality of the Department seems to be “Gotcha” rather than a more
cooperative approach. Do you find that with OSHA primarily, or do
you find it with other offices as well? I have had people tell me
they will invite OSHA in to ask it to tell them where they have
made mistakes, and where they need to correct, and then they end
up getting a fine. You know, a business invited OSHA in, and the
get a fine of $5,006 or $10,000 or $15,000 because they haven't

lone something properly, and yet they are trying to identify what
they haven't done properly to correct it. This seems to relate.

Mr. CRAWFORD. Yes, sir, it does.

When we spoke, again, what I wanted to mention is that we
looked at 30—we met with 36 employers and employee groups. I
want to put this in context. We also had an advisory group made


107

Mr. BarNow. So it is a lot leaner than it used to be, and I don’t
know if there is that problem so much as there used to be.

Mr. SHays. We have opportunities to make a contribution, and
you all have made a contribution by your testimony and by your
studying
Mr. Towns. Let me just ask half a question.

Mr. SHays. You may ask a third of a question, or three-quarters.

Mr. Towns. You know, I was thinking about the whole process
in terms of reform. You mentioned that we would be able to serve
some folks that may be not getting the kind of service that they
need, and I would sort of think about in terms of a district of—ac-
tually, most urban areas in particular, especially the age group be-
tween 16 and 19 in terms of Hispanic and black youth in particu-
lar. You know, if we could sort of find a way to target this popu-
lation, I think that that would be a wise way to spend the dollars
rather than to just sort of get caught up and you are sort of like
cutting down the amount, and I think somewhere along the line if
we could begin to target and to focus, then I think we would be
able to serve that difficult population, which now in many in-
stances is not served, that had the lack of education, which is also
a problem, and drug abuse is a problem, and we just have not been
able to reach that group in a major kind of way.

Ms. Pinvus. I think that is an important thing to think about in
consolidation, that certain priorities you may want to keep in place
because there is a danger, if you consolidate too much, then things
that are targeted to specific groups might get lost, and so there is
a real need to maintain that emphasis of things that one wants to
consider priorities.

On the other hand, if things are streamlined and managed better
and really a more integrated service delivery system is in place,
those kinds of groups could presumably be served better because
there would be more integration with social services needs, health
care needs, and other needs that that population might benefit
rom.

Ms, NIGHTINGALE. For that particular population too, that is an-
other example where some consolidation of programs that might be
in the Education Department and in the Labor Department might
make sense, because we know that it is the adolescents and young
teenagers, that there is a disjuncture there between the Head Start
years and the summer work—summer employment years, and that
we need to do something to help prepare young people for the
world of work before they hit 14 or 15 and have serious problems
already in the labor market. So there we need a seamless system
that goes to younger age groups in terms of the work force develop-
ment strategies.

Mr. Towns. Let me say I certainly appreciate your testimony,
and I’m hoping that you can some way help us to sort of not to
focus on one isolated situation that occurred and bring up national
legislation to deal with it. You know, you have one person that was
able to sort of beat or cheat the system, and then of course we have
had thousands and thousands and thousands to benefit from what
we are doing, but because of that one isolated situation or example,
that we come up with national legislation that we spend more
money on, you know, just dealing with that issue than we do in


92

but it is important to recognize that what they are counting there
are really funding streams, some of them are not really programs
at all. For example, the Title IIA program for JTPA as they count
it includes four programs. The youth Title IIC, which was split off
from IIA in the 1992 amendments, adds three additional titles. So
that is a total of seven just for those two major programs. Their
list includes demonstrations such as the Youth Fair Chance that
are only temporary and were specifically added so that we might
test out new promising events. In addition, there are some that are
quite tangential to the employment and training area that would
include the eight Small Business Administration programs in m:
opinion. So there may well be too many programs, but to just loo
at, focus on, that 163 number I think can be a bit misleading.

The Department of Labor staff has indicated that about three-
quarters of the money is concentrated in 12 programs. In a study
I did several years ago I identified about 14 major programs. That
is where the money is, and that is where of course you have the
most potential for savings. In addition, some of these programs
that have been established are for specific target groups such as
the elderly, migrants, refugees, Native Americans, and people with
disabilities. The Congress needs to think clearly whether they wish
to consolidate these programs or whether there still remains a need
for separate programs for such individuals. In the meantime, in
terms of major opportunities for cost savings and for consolidation,
focus on the big programs like JTPA, JOBS, vocational education,
and food stamps.

Finding No. 2: Most agencies do not know if their programs are
working effectively and gains have been modest at best. This is a
statement by Mr. Crawford that he made today as well as in pre-
vious testimony.

Most agencies may not collect data on participants and outcomes,
but the JTPA Title II programs gather a great deal of information
about their participants, and a major evaluation has recently been
conducted. Mr. Crawford cites findings from the JTPA evaluation,
but he only cites the impacts for youth, for whom the program does
appear to be quite ineffective. He omits the findings for adult men
and women, for whom JTPA has a statistically significant positive
impact of about $9,900 per year in 1993 dollars, so if we converted
that to 1995 dollars it would be even larger. My concern is that
Congress may misinterpret Mr. Crawford’s remarks to apply more
generally than is warranted.

The third finding that I took issue with in my paper had to do
pith the administrative cost savings, and that was covered by Ms.

indgus.

I would like to turn now to impediments to programs identified
by General Accounting Office and the Inspector General, and here
we agree for the most part. Barriers that keep programs from
working well together are one form that we have; and, second, we
have barriers that keep eligible individuals from actively partici-
pating. In some instances these barriers arise because of decisions
made by Cabinet departments.

A good example here is that the Departments of Labor and
Health and Human Services have established different definitions
of low reading levels for the JOBS and JTPA programs. In other


60

centage could be indexed to the type and size of the awardee. Such an approach
would simplify and reduce the administrative burden associated with determining
indirect costs, at the same time allowing recipients to recover non-direct costs ap-
plied to a Federal project.

FEDERAL EMPLOYEES’ COMPENSATION ACT PROGRAM

Mr. Chairman, as you may be aware, the Federal Employees’ Compensation Act
(FECA) is the basic workers’ compensation program that pays benefits to Federal
employees and certain other covered workers who incur disability or disease through
on-the-job injury or exposure. During FY 1994, Federal agencies spent over $1.2 bil-
lion on compensation and $485 million on medical benefits. Our investigative focus
in the FECA program can be divided into two areas of concentration: medical pro-
vider fraud and claimant fraud. Over the years, our investigations have uncovered
many schemes where doctors, clinics, pharmacists, physical therapists, medical tech-
nicians, and providers of medical equipment have billed the government for services
that were not rendered, filed multiple bills for the same procedure, billed for non-
existent illnesses or injuries, or overcharged for services. For example:

* A recent investigation resulted in a Texas physician, Dr. Earl M. Stenger,

Jeading guilty to submitting false Billings for services never rendered. Our un:
Nereoves ‘agent, posing as a patient, told the doctor she needed time off from
work for persona) reasons. The doctor had our agent return to his office periodi-
cally over a period of a few months. At each visit, he billed the FECA program
for services such as physical therapy, biofeedback or family counselling, even
though none of these services were actually provided. He is scheduled to be sen-
tenced this month.

¢ In another case, a registered physical therapist and his wife, Leonard and
Kathleen Vigliatore, pled guilty to conspiracy and mail fraud, respectively, in
a scheme where they defrauded the Department by submitting fraudulent bills
for treatment that was never rendered to FECA claimants. The defendants re-
ceived approximately $1.4 million as result of the scheme. Kathleen Vigliatore
was sentenced to 24 months of probation. Leonard Vigliatore was sentenced to
27 months in prison and 36 months of probation, and ordered to make restitu-
tion of $125,000.

With respect to claimants, we generally find two types of FECA fraud—either
where the actual injury being claimed is falsified or where the claimant is injured,
recovers, and then conceals or falsifies non-injury information, particularly unre-
ported income, that could reduce or terminate benefit payments. For example:

* Following a joint investigation with the FBI, a former Treasury employee,
Billy Clem Rae, was convicted in a scheme to defraud the FECA program. He
tried to further the scheme by attempting to hire an individual to murder a key
witness, who had information that Rae was not totally disabled and was, in
fact, owner of four different corporations while fraudulently receiving over
$188,000 in FECA benefits. He was sentenced to over 12 years in prison and
3 years of probation, and fined $175,000.

‘* A former Navy employee, Robert V. Suttle, who sustained a back injury in
1971, pled guilty after being charged with submitting false statements to fraud-
ulently obtain FECA benefits. Our investigation found that, from 1980 through
1994, Suttle worked as a real estate agent without reporting his employment.
Following his guilty plea to mail fraud, he was sentenced to 14 months in prison
and 3 years of probation. He agreed to pay restitution of $257,000 and pay a
fine of $50,000.

In addition to our investigative efforts, my office has coordinated with members
of the IG community by providing training and technical advice on conducting
FECA fraud investigations. Moreover, during the 103rd Legislative Session, we
worked closely with the Congress and the Department to successfully secure pas-
sage of legislation that deters fraud and abuse of the FECA program. The legislation
raised the violation of the FECA fraud statute from a misdemeanor to a felony. It
also authorized the Department to permanently terminate the benefits of anyone
convicted of defrauding the program.

The OIG has also n leading a review by the IG community to determine
whether Federal employing agencies are efficiently and effectively managing their
workers’ compensation responsibilities under FECA. As a result of our findings at
the Department of Labor, we have stimulated interest in the IG community to audit
their agencies’ FECA programs which, as I mentioned earlier, collectively account
for billions of dollars in appropriated funds.

The OIG is of the opinion that real savings may be achieved by the Federal Gov-
if both the agencies and DOL effectively monitor FECA cases to detect and



56

less); another 14 percent achieved some em; loyability enhancements (that is,
training which provided at least the potential for future employment); and the
remaining 33 percent did not obtain a job or achieve an employability ‘enhance-
ment. We also found that individuals with educational and personal barriers,
such as school dropouts, persons with disabilities, and substance abusers, were
usually not assisted to the same extent as persons who lacked job skills, job
search skills and labor market information. The audit raised questions about
whether JTPA was sufficiently funded to carry out its legislative mandate and
whether the Program's focus should be narrowed.

¢ Our March 1992 report on Kentucky Industrial Incentives questioned $6.9
million of JTPA funds expended by the State of Kentucky to subsidize its indus-
trial development gram. The State reimbursed a portion of normal start-up
costs incurred by the Toyota Motor Corporation and the Budd Company to re-
cruit and train individuals who were highly qualified for the jobs and who were
not in need of JTPA assistance.

« In a report issued in March 1994, we questioned $7.1 million in Program
Years 1989 and 1990 expenditures by the Alamo Consortium SDA. We identi-
fied significant amounts spent on activities that provided marginal, if any, bene-
fit to A participants as well as unnecessary or undocumented costs for train-
ing and services. We concluded that the Consortium’s problems were of such
magnitude that we recommended that the Separtment take steps to classify the
SDA as a high-risk subgrantee.

* Our March 1992 report on Computer Educational Equipment Usage in Flor-
ida questioned over $4.7 million for computer equipment purchased with JTPA
funds by six Florida SDAs. We determined that 82 percent of the users were
not eligible for JTPA and JTPA was never compensated for the costs of the non-

users.

Another audit report issued in March 1992 questioned almost $850,000 in
unwarranted profits generated through the State of Florida’s layering of fixed
unit price, performance-based contracts. We questioned an additional $365,000
in unsupported administrative costs charged by a private non-profit organiza-
tion.

Partially in response to OIG findings, as well as suggestions by the states them-
selves, after 4 yes of public and legislative debate, the Job Training Partnership
Act was amended in 1992. The JTPA Amendments incorporated strong provisions
to improve JTPA procurement as well as program and cost accountability. The final
rule implementing the amendments was published September 2, 1994, will not
be effective until June 30 of this year. We believe the amendments will significantly
reduce incidents such as those cited above. Thus, I am concerned that these reforms,
which took so long to be achieved, might be diminished or discontinued under a de-
centralized framework. Consequently, we would recommend that in considering a
block grant approach to job training, Congress ensures that the standards of ac-
countability established by the 1992 amendments are preserved.

Essentially, Mr. Chairman, the OIG believes services will not be maximized, nor
costs minimized, without a valid measurement of return on investment and a level
of accountability adequate to ensure that the investment of public monies is safe-
guarded and justified.

In addition to our audit work, over the years my office has devoted significant in-
vestigative resources to detect and deter JTPA program fraud. Our investigations
continue to disclose serious endemic problems, as well as outright criminal schemes,
such as billing for ghost participants, overbilling or embezzlement. by consultants
and contractors, falsification of participant scores, and/or abuses by brokers and
other middlemen. For example:

» We conducted a criminal investigation of Quality Plus, an Atlanta secretar-
ial school, in which we determined that operators and instructors were provid-
ing answers or fabricating test scores for JTPA participants and fraudulently
collecting JTPA funds. Kathleen Bacon Miller pled guilty to charges of theft and
embezzlement charges. Barak Miller pled guilty to two counts of embezzlement.
They are awaiting sentencing, while a third defendant is awaiting trial. The
criminal investigation also identified areas of program migmanagement. A Sep-
tember 1993 audit of this contractor resulted in almost $300,000 being ques-
tioned, primarily due to program mismanagement and other irregularities.

* We also conducted an investigation of Kew York’s Project Rebound and sev-
eral of its subcontractors. Operated by the National Association for the Ad-
vancement of Colored People, Project Rebound served as a major JTPA on-the-
job training broker for many years and received multi-million dollar JTPA con-
tracts to identify and place individuals in OJT positions in the New York City
area. Our investigation found that Project Rebound executives and placement



18

mary and secondary schools, built around the notion of citizenship
and community, of training and democracy.

The Labor Department’s roles are very different. We are focusing
upon preparing people for jobs and protecting them once they are
in jobs. We are focused very specifically on occupational skills, on
the transitions people have to make from one job to another, and
also on the protections they need, with regard to pensions and safe-
ty and health. They’re very, very different roles, very different re-
sponsibilities. And I think there are some downsides to mixing
them up.

Let me say one final thing. I am skeptical, quite frankly of sim-
ply moving around organizational boxes in attempt to show that
there is real, genuine reform. Secretary of Education Riley and I
have worked very, very closely together on a few of the projects
where there is overlap. Our two staffs, I’m proud to say, have
worked in an exemplary way.

There is no substitute for that kind of interdepartmental, inter-
agency cooperation, even if we were under one heading, even if
those two departments were theoretically joined together. You still
are making no progress unless staffs having different responsibil-
ities are working effectively together. Simply changing the organi-
zational boxes, as I said, is no substitute for genuine reform.

Mr. Towns. Thank you, Mr. Secretary.

Mr. SHays. Thank you, Mr. Towns. Mr. Scarborough, you, too,
have a very generous 5 minutes coming to you.

Mr. SCARBOROUGH. Mr. Secretary, thanks for coming. I appre-
ciate you being here and I certainly appreciate the setting, Mr.
Chairman, that you set up so we can have an informal setting. And
we all realize we’re going through some difficult times, and it
helps, I think, this process, I think, helps keep the edge off of it.
So, Til start with a softball question for you here. You don’t like
consolidation. What would you say to those that have been talking
about abolishing the Department of Labor? And what specific crises
would occur, in your mind, for the American work force if that were
pursued?

Mr. REICH. Congressman, the Department of Labor exists as the
core agency, the core department concerned with the number of
jobs and the quality of jobs in the United States. Our training pro-
grams, our employment programs, our programs to ensure the safe-
ty and health of workers, the pension benefits of American work-
ers, our programs to ensure that there is not discrimination at the
workplace, to ensure, in short, that American workers have the
fullest productive lives possible would be severely jeopardized by
any effort, even to reduce in this day and age, given the changes
that are underway in the American economy, to reduce the budget
of this department.

Now, I know that every Cabinet Secretary, every agency head,
every government head always says the same thing—don’t cut. But
I can sit here and tell you in all sincerity and all honesty, we are
doing much more with far less. We have new responsibilities; the
American work force is growing. And as I said in my opening re-
marks, the challenge today is so much greater than it was before
because so many Americans are trapped into the old economy.
They need to have pathways to the new economy.


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51

guage, that is the Labor Department statutory language, Public
Law 426, which created the Department in the 67th Con,

Do we need to debate this point? I don’t think so. If you agree
with me that Public Law 426 lays out core values that must be pre-
served, then any budget reduction or program termination or agen-
cy consolidation proposal that fails to satisfy the mandate should
be discarded right away. For example, we all know that the oppor-
tunities available to low-skilled workers are in rapid decline. Man-
ufacturing and production jobs which were once a wage earner’s leg
up into the middle class are moving offshore to low-wage econo-
mies.

Can we agree that if we are to stabilize and increase our middle
class, this Nation must produce jobs and a work force to fill them?

Can we agree that we cannot get people off welfare and into jobs
without effective job training programs? That makes a lot of sense
to me.

Can we also agree that if we are to maintain our competitive ad-
vantage globally we must retain that work force to meet the high-
est skills, high-wage job opportunities?

Then clearly initiatives that arbitrarily cut employment and
training programs are ill advised and counterproductive and should
be discarded.

Mr. Chairman, I am convinced that the solution is out there
somewhere floating around, and I’m equally convinced that we
must work together to find that solution, Republicans and Demo-
crats and Independents. The Congress and the administration need
to find this and need to find it right away.

A first step, however, must be to find some common ground. To-
ward that end, I look forward to the testimony of our witnesses and
I look forward to working with you to be able to find that common

ound,

I yield back the balance of my time.

[The prepared statements of Hon. Edolphus Towns and Hon.
Gene Green follow:]

PREPARED STATEMENT OF HON. EDOLPHUS TOWNS, A REPRESENTATIVE IN CONGRESS.
FROM THE STATE OF NEW YORK

Chairman shays, thank you for scheduling this hearing concerning opportunities
for cost savings and improved efficiency at the Department of Labor. Today’s meet-
ing follows Secretary Reich’s testimony regarding the agency's 1996 budget request,
streamlining and reinvention priorities, and efforts to correct program and oper-
ational deficiencies. The Secretary's presentation has fren us a real sense of the
commitment and insight of this administration. In addition, it provides us a yard-
stick with which to measure other proposals.

Mr. Chairman, I fully appreciate the subtleties of our consideration of this issue.
And J wonder if it may be useful for us to first reconcile our priorities and ideals
before attempting to overhaul the labor bureaucracy, or fundamentally transform
federal policy on employment issues.

For one, it should be a given that the purpose of the agency is to “foster, promote,
and develop the welfare of the wage earners of the United States, to improve their
working conditions, and to advance their opportunities for profitable employment.”
That’s not my language. That’s the Labor Department's statutory language—Public
Law 426, which created the Department in the 62nd Congress.

Do we need to debate this point? I don’t think so. If you agree with me that Public
Law 426 lays out core values that must be preserved, then any budget reduction,
or program termination, or agency consolidation proposal that fails to satisfy the
mandate should be discarded.


80

Recipient Name/Address: National Alliance of Business, 1201 New York Avenue,
N.W,, Washington, D.C. 20005.

Type: Grant.

Amount: $648,167.

Authority: DLMS 2-833(f(3)—one responsible source.

Purpose of Project: To provide a National Workforce Assistance Collaborative
project to develop courseware and design curricula for incumbent worker training.

Explanation of Recipient Choice: Services are available from only one responsible
source, and no substitute will suffice. The recipient has unique qualifications to per-
form the type of activities to be funded.

Percentage Spent on Administrative Costs: 23%.

Agency: Employment and Training Administration (BTA), Office of Policy and Re-
search.

Recipient Name/Address: National Alliance of Business, 1201 New York Avenue,
NW. Washington, D.C. 20005.

Type: Grant.

Amount: $4,100,000.

Authority: DLMS 2-833(f(3)—one responsible source.

Purpose of Project: These grants will provide technical assistance and training
services for each organization's respective affiliate network, in the areas of program
development, program and fiscal management, and staff training.

Explanation of Recipient Choice: Services are available from only one responsible
source, and no substitute will suffice. The recipient has unique qualifications to per-
form the type of activities to be funded.

Percentage Spent on Administrative Costs: 26%.

Agency: Employment and Training Administration (ETA), Office of Policy and Re-
search.

Recipient Name/Address: National Alliance of Business, 1201 New York Avenue,
N.W., Washington, D.C. 20005.

Type: Grant.

Amount: $4,070,000.

Authority: DLMS 2-833(1%3)—one responsible source.

Purpose of Project: ‘This project will enhance and promote participation of the
business sector in the partnership program of the federally funded employment and
training system, It will provide general support services to Private Industry Coun-
cils and state job training coordinating councils to strengthen their roles as employ-
ment and training coordinators toward maximizing the resources and expertise of
the business sector.

Explanation of Recipient Choice: Services are available from only one responsible
source, and no substitute will suffice. The recipient has unique qualifications to per-
form the type of activities to be funded.

Percentage Spent on Administrative Costs: Not available.

Agency: Employment and Training Administration (ETA), Office of Policy and Re-
search,

Recipient Name/Address: National Alliance of Business, 1201 New York Avenue,
N.W., Washington, D.C. 20005.

Type: Grant.

Amount: $700,000.

Authority: DLMS 2-833(1(3)—one responsible source.

Purpose of Project: To provide a National Workforce Assistance Collaborative
project to develop courseware and design curricula for incumbent worker training.

xplanation of Recipient Choice: Services are available from only one responsible

source, and no substitute will suffice. The recipient has unique qualifications to per-
form the type of activities to be funded.

Percentage Spent on Administrative Costs: 23%.

Agency: Employment and Training Administration (ETA), Office of Policy and Re-
search.

Recipient Name/Address: National Alliance of Business, 1201 New York Avenue,
N.W., Washington, D.C. 20005.

Type: Grant.

Amount: $2,000,000.

Authority: DLMS 2-833(f(3)—one responsible source.

Purpose of Project: These grants will provide technical assistance and training
services for each organization's respective affiliate network, in the areas of program
development, program and fiscal management, and staff training.



13

it worthwhile for them to work, would otherwise be in the work
force. And finally, and this perhaps is the most important, it hides
the fact that there are so many millions of people who are barely
making it, whose wages, even though they are working, are not
enough to support a family.

Mr. SANDERS. Right. In other words, if you work for 20 hours a
week for $5 an hour, you are officially employed, if you had a col-
lege degree.

Mr. REICH. You are officially employed. What we are seein;
around the country, and we saw this beginning 15 years ago ani
it is accelerating, many families have now two wage earners, but
they also, in the family, you have a third shift.

ir. SANDERS. Let me just jump in here, because we don’t have
a lot of time. And the second question that I wanted to ask you is,
I get upset when every month these statistics come out—the econ-
omy is booming but presumably it’s slowing down. And none of that
makes sense to anybody in the State of Vermont. They don’t believe
it. Unemployment in the major city in the State of Vermont, Bur-
lington, 3 percent. Nobody believes it.

I would urge you, in the strongest possible terms, to try to come
up with statistics that reflect everything that you have already
said. In other words, the economy is not doing well for ordinary
people. We could talk about average income, right? You make a
million dollars, I’m broke; we’re averaging half a million dollars a
year. Not bad. I’m not doing so well.

Can we come up with statistics which inform the American peo-
ple about the well-being or the not-so-well-being of the average
American worker, including a lot of the information you gave us
today, so that people don’t think they’re crazy when they turn on
the television—the economy is booming; gee, it’s not booming for
me. Can we come up with statistics that ordinary people can un-
derstand who don’t have a Ph.D. in economics?

Mr. REICH. Congressman, the BLS now has started every month
to indicate not only the number of workers who are part-time who'd
rather be working full time, and also the number of workers who
were too discouraged to look for work, but even that other category
I mentioned. That is, workers who say that they might otherwise
look for a job, but they don’t see it presently worthwhile to look.
In other words, the current reports, as they have been revised, pro-
vide all the information you seek.

Perhaps there is another way of displaying it. But the CPS has
been revised. In fact, we——

Mr. SANDERS. I’m sorry, let me just interrupt you with something
because I’m going to run out of time in a second. The concern that
I have is the official statistic that gets most of the play in the pa-
pers back home is unemployment at 5 percent. What you are tell-
ing me, everything that you are saying to us is that there’s a lot
more that’s going on in the economy than that. I would urge you
to try to get that information out to at least as great a degree as
the so-called official unemployment statistics.

Mr. REICH. Yes. I think that’s a good point. Let me just add one
further note, and that is that I think we can justifiably be proud
as a country, as a government, as a society of the job wth that.
we've had over the past 2 years—5.7 million new jobs through Jan-


55

Mr. Chairman, this concludes the summary of my oral statement,
and Mr. Fisch and I will answer any questions you or any member
of the subcommittee may have.

(The prepared statement of Mr. Masten follows:]

PREPARED STATEMENT OF CHARLES C. MASTEN, INSPECTOR GENERAL, U.S.
DEPARTMENT OF LABOR

Good morning, Mr. Chairman and Members of the Subcommittee. Thank you for
inviting me to appear before you in my capacity as Inspector General of the US.
Department of Labor (DOL). I'am pleased to be here today to address the important
topic of finding ways to maximize government services while containing costs. | am
accompanied by Mr. Joseph Fisch, the Assistant Inspector General for Audit.

From the outset, I wish to emphasize that the views expressed today are mine
as the Inspector General and may not be the official position of the Department.

BACKGROUND

The Office of Inspector General (OIG) was established at the U.S. Department of
Labor by the Inspector General Act (IG Act) of 1978. Our mission is to provide inde-
pendent and objective oversight of the Department. We do this by conducting audits
and investigations of DOL programs and operations. We also conduct criminal inves-
tigations related to the influence of organized crime and labor racketeering in em-

labor-management relations and internal union affairs.

My office is in a unique position to offer views on ways to maximize services while
containing costs in DOL for two principal reasons. First, while I, as Inspector Gen-
eral, am under the broad supervision of the Secretary of Labor, the IG Act preserves
OIG's independence from the Department. This organizational independence allows
us to present fair and impartial conclusions and recommendations on the economy,
efficiency and effectiveness of DOL programs and operations. Second, the DOL OIG
“lives” in the Department of Labor, alongside other departmental components; this
gives us an insider’s knowledge of the Department's workings.

It is from this dual perspective that I suggest the following DOL programs areas
and agencies for re-examination. In doing so, funds potentially can be freed up or
better utilized to carry out the Department's fundamental mission of serving and
protecting America’s working men and women.

EMPLOYMENT AND TRAINING PROGRAMS.

dob Training Partnership Act

There is much discussion at all levels on the need to reform the employment and
training system. Programs operated under the Job Training Partnership Act (JTPA),
the centerpiece of the current system, serve as a reference point for the debate.

Mr. Chairman, one of our in concerns with respect to JTPA, and which we
have been reporting since 1988, is that ETA has still not instituted outcomes-based

formance measures to show the return on investment for the JTPA program. The

ITPA law itself provides that “it is essential that criteria for measuring the return
on. . . investment be developed . . . to be measured by long-term economic self-
sufficiency, increased employment ‘and earnings, reductions in welfare dependency,
and increased educational attainment and occupational skills.” Although the current
formance measures have come a long way since the early days of JTPA, they still
lo not get to the fundamental issues of long-term economic self-sufficiency, in-
creased employment and earnings, reductions in welfare dependency, and increased
educational attainment and occupational skills, as required by law. Without such
measures, the effectiveness of JTPA, which received a Fiscal Year 1995 appropria-
tion of over $5 billion, cannot be Properly evaluated.

Another area of concern relates to the current discussion of block grants as a
funding mechanism for a one-stop delivery system. The original JTPA program, al-
though not enacted as a block grant, was implemented with some block grant prin-
ciples under the “New Federalism” of the early 1980s. The OIG is of the opinion
that many of the accounting, procurement, compliance and performance measure-
ment weaknesses we have identified may, in part, be attributable to the way JTPA
was implemented. Let me cite just a few examples from our audit findings over the
past, several years pertaining to the STPA program prior to its being amended in

© Our March 1993 audit report on JTPA Title I-A Program Outcomes for
Program Year 1990 found that, of the participants who left the program, 53 per-
cent obtained jobs (of which almost falt were paid hourly wages of $8: or



2

PREPARED STATEMENT OF HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN
ConGRESS FROM THE STATE OF CONNECTICUT

On behalf of the Human Resources and Intergovernmental Relations Subcommit-
tee, let me welcome our witness today, the Secretary of Labor, Robert B. Reich. We
asked him to launch our oversight of the Labor Department by describing the agen-
cy’s mission, its successes and its challenges.

In this hearing, as with all the department oversight hearings we will conduct,
our mission is to ask some very fundamental questions about the department and
it programs. In some cases, these questions have not been asked for a very long
time, but must be asked now if we are to meet both our budgetary and service goals
intelligently and compassionately.

So today, we ask about every program and policy: What, jis the mission? Ist till
the right thission? Is it still worth ing? Has the mission been accomplished? If we
were not already doing it, would the federal government now go into it?

Today we will also focus on DoL’s organization, operations, policies and programs.
We will discuss the Secretary's plans for reducing costs, improving efficiency, and
reinventing and streamlining the department.

We are particularly interested in exploring initiatives which coordinate and con-
solidate the multitude of overlapping Dol, programs in education and job training
areas. According to General Accounting Office (GAO) reports, there are currently
163 federally funded programs administered by 15 federal agencies which provide
employment training assistance. These programs, according to the GAO, often tar-
get the same clients, share the same goals, and provide similar services; yet, the
agencies have separate administrative staffs to oversee and manage duplicative pro-

ams.
the FY 96 budget request for DoL. is $38.7 billion, up 14.5% or $4.9 billion over
the budget authority for FY95. This includes a $14.2 billion request for discretionary
spending, a rise of 27.9% or $3.1 billion over FY95 budget authority. DoL’s employ-
ment level request would also rise slightly from 17,632 to 17,936. We hope to iden-
tify opportunities for substantial cost savings in these numbers as we carefully
study existing and planned programs and activities.

Additional hearings are being planned on DoL. We will have as witnesses: the
GAO; Dols Office of Inspector General; Congressional Budget Office; and others
from the public and private sectors familiar with DoL and its programs.

In the future, this Subcommittee will also examine proposals to consolidate the
Department of Labor, Department of Education and perhaps other related agencies
into a single department.

We look forward to the Secretary Reich's testimony and appreciate his time and
views. His testimony will be most helpful to this Subcommittee as we discharge our
oversight and reform responsibilities.

Mr. SANDERS. Before questions, or should we start questions?

Mr. Suays. No, if you have a statement to make, I’d be delighted
to have you make a statement.

Mr. SANDERS. Sure.

Mt Suays. Or we can put it in the record, that might be advis-
able.

Mr. SANDERS. Let me just open up by thanking Mr. Secretary
Reich for being with us, and to tell him that I think he has cer-
tainly been one of the excellent members of the President’s Cabi-
net. I think you need a pay raise; you're doing a great job. And I
especially applaud your efforts in terms of fighting to raise the
minimum wage. I appreciate what you're doing on this striker’s—
the replacement striker issue and so forth.

The concerns that I have, Mr. Secretary—and actually I commu-
nicated those to you in writing a while ago—is that I think it be-
comes, and I wanted to focus on the Bureau of Labor Statistics if
I might for a moment—one small part of the overall work——

Mr. SHays. But in your questioning?

Mr. SANDERS. Should we wait for the questioning?

Mr. Suays. Yes, let’s wait for the questioning.

Mr. SANDERS. OK, then that’s all. Delighted to have you here.


72
Many Agencies Engaged in Job Training

Number of
programs utes

Target group ——
Totsl Labor“

19
16
10
10

Dislocated workers.
Native Americans ...
Economically disadvantaged

Mr. Suays. I thank the gentleman.

Mr. Masten, I would like you to just touch on briefly the last part
of your statement dealing with—actually, it is not the last. I would
like you to talk about the NAB and the National Alliance for Busi-
ness as an example of—in your testimony of where they are receiv-
ing funds without having to compete for them.

Mr. MASTEN. Mr. Chairman, we audited the NAB grant for pro-
gram years 1988 and 1989 and issued our report in 1991. The
major concern at that time was that the audit of the NAB grant
had been awarded on a noncompetitive basis. We feel that this is
not the best way to award these types of grants.

Mr. Suays. Are they allowed to do that by law?

Mr. FiscH. Some of the appropriation language that comes off
the Hill, Mr. Chairman, indicates to the program that some of
these grants should be competed noncompetitively.

Mr. CRAWFORD. What you have also—we took at a look at some
of those as well.

Mr. Suays, I just want to make sure—Mr. Crawford, I’m happy
to have you respond. I just want to be clear. I’m not sure if the an-
swer is yes or no.

Mr. Fiscu. It is yes and no. I don’t think that they have to be
noncompetitive, but the agency and program management——

Mr. SHays. Can you not speak in a negative but speak in a posi-
tive. They don’t have to be—say that again.

Mr. FISCH. They don’t have to be awarded on a sole source basis.

Mr. SHays. Answer it this way —

Mr. Fiscu. Do they have to be competed? No.

Mr. Suays. OK, and that is at the discretion of the Department.

Mr. FISCH. Yes.

Mr. Suays. And in most cases are these grants competitive?

Mr. FiscH. They could be competitive without any problem.

Mr. SHays. They aren’t though.

Mr. FiscH. They aren’t. They have had a long history of not
being competitive.

Mr. Suays. OK. Since you made your findings in 1991, how has
the Department responded?


27

Que of the most significant trends in the changing face of our nation's workforce
is the participation of women. Despite the increasing number of women entering the
labor force, women continue to e less money than men and Jag behind in bene-
fits, status, and job security. Despite thirty years of equal employment opportunity

licies, women continue to be concentrated in low-wage jobs, and continue to face

arriers to equal opportunity in the workplace.

I have been pleased that the DOL has established two Prggrams to increase low-
wage women’s access to high- wage jobs: the Nontraditional Employment for Women
Act (NEW) and the Women in Apprenticeship and Nontraditional Occupations Act
(WANTO) programs. I sponsored the Women in Apprenticeship and Nontraditional
Occupations Act (W. }) to help integrate women into nontraditional jobs which
pay 30 percent more than traditionally female jobs. Senator Nancy Kassebaum
sponsored the same legislation in the Senate, and with bipartisan support, Congress

assed the bill. With the help of Senator Slade Gordon, WANTO was funded at
$750,000 in 1984 and at $744,000 in 1995, As a result, the DOL has funded six com-
munity-based organizations to provide technical assistance to more than 75 employ-
ers and unions in 25 states. Eighty-nine additional employers and unions have re-
quested this technical assistance. It is my understanding that the DOL was so
pleased with WANTO, that a similar program was set up for minorities.

I am concerned, however, to learn that WANTO and NEW are currently listed
among 27 programs to be consolidated under a new workforce program called the
G.L Bill for America’s Workers. I am concerned that consolidation of WANTO and

'W in a system of job training block grants might eliminate the impact of these
programs.

It is my understanding that the DOL rescinded the appropriation of $744,000 for
Fiscal Year 1995 and decided not to cs forward with the Request for Proposal that
the Women’s Bureau had developed for WANTO which was scheduled for release
at the end of March.

WANTO is the only m in the country which focuses on integrating women
into higher paying male-dominated jobs which pay a living, wage for women and
their families. I look forward to discussing with Secretary Reich how the purpose
of WANTO, the recruiting, training and integrating of women into higher paying
jobs, will be addressed under the G.I. Bill.

Mr. GREEN. Mr. Chairman, I'd like to ask you now to consider
to place in the record an opening statement, and I will try and talk
as fast as a Texan can talk on some questions in my 5 minutes.
One, I want to thank you for your comments about the one-stop
centers. Doug Ross was in Houston, and we have created a one-sto)
center—not that quick—using both our community college, our Jol
Training Partnership Agency, and also our Texas Employment
Commission, in doing it without Federal designation. We hope to
relieve that; that’s why we had Doug Ross there.

But that is working, and with some of the programs—and I hear
we talk about in my other Committee on Education and Economic
Opportunity, that the consolidation effort from some of the pro-
grams, and a lot of those programs are so small, they need to be
consolidated so you can leverage that administrative cost anyway.
But I appreciate the effort that you’ve done for 2 years in trying
to do that and make sense of our Job training programs.

I worry, just like you did and my colleague from Maryland, with
the recisions in some of the job training recisions, the summer jobs
program. I have 2,000 young people in my district, alone, in Hous-
ton who participate in that. And I know that it has success because
I’ve watched them over the 2 years I’ve been in Congress and seen
the success of these high school kids. And it does train them to go
on and gives them some real job skills that they can take some-
where else.

But let me—and also the tech prep recisions that I’m concerned
about, because moving that down to the seventh grade even, and
if we rescind all that money—the proposals we have is moving it


70

Mr. Chairman, that concludes my prepared statement. At this time, I will be
happy to answer any questions you or other members of the Subcommittee may
ave.

Appendix I—DESCRIPTION OF MAJOR STATUTES AND EXECUTIVE ORDERS GOVERNING WORKPLACE.

REGULATION
Principal en-
‘Statute Description forcement
agency
Labor Stendards:

ASA... Establishes minimum wage, overtime pay and child labor stand- Labor -
ards. woz

Davis-Bacon Act ... Provides for peyment of prevailing local wages and fringe benefits Labor -
to laborers and mechanics employed by contractors and sub- WHO
contractors on federal contracts for construction, alteration, re-
pair, painting or decorating of public buildings or pubic work.

Service Contract Att... Prowdes for payment of prevailing local wages and fringe benefits Labor -
and safety and health standards for employees of contractors WHO
‘and subcontractors providing services under federal contracts.

Walsh-Healey Act Provides for labor standards, including wage, hour, safety, and Labor -
health for employees working on federal contracts for the man- WHO
ufecturing of furnishing of materials, supplies, articles, or
‘equipment.

Establishes standards for hours, overtime compensation, and Labor -
safety for employees working on federal and federally financed WHO
contracts and subcontracts.

SPA Protects migrant and seasonal ogricultural workers in thei deal- Labor -
ings with farm labor contractors, agriculturat employers, agri- WHO

cultural associations, and providers of migrant housing.

Benefits:
Establishes uniform standards for employee pension and welfare Labor -
benefit plans, including minimum participation, accrual and PBA

vesting requirements, fiduciary responsibilities, and repo PAGE,
and disclosure requirements. Treasury -
IRS

COBRA oa Provides for continued health care coverage under group health Labor -

plans for qualified separated workers for up to 18 months. PHBA
Treasury -

Unemployment Compensation ....... Authorizes funding for state unemployment compensation adminis- Labor -
trations and provides the general framework for the operation TAS
of state unemployment insurance programs.

FAIA Enitles employees to take up to 12 weeks of unpaid, job-pro- Labor -
tected leave for specified family and medical reasons such as WHO
the birth or adoption of a child or an illness in the family.

Civil Rights:

Title Vi. Prohibits employment or membership discrimination by empiyers, EEOC?
employment agencies, and unions on the basis of race, color,
teligion, sex, ot national origin; prohibits discrimination in em-
ployment against women affected by pregnancy, childbirth, or
related medical condition

Equal Pay Act Prohibits discrimination on the basis of sex in the payment of Ee0C
wages.

FO 1246 a Prohibits discrimination against an employee or applicant for em- Labor -
ployment on the basis of race, color, religion, sex, or national  OFCCP®
‘rig by federal contractors and subcontractors, and requires
federal contractors and subcontractors to take affirmative ac~
tion to ensure that employees and applicants for employment
are treated without regard to race, color, religion, sex, or na-
tional origin.

ADEA .. Prohibits employment discrimination on the basis of age against EEC
persons 40 years and older.

ADA Prohibits employment discrimination against individuals with dis- EEOC

abilities, requires employers to make “reasonable accommoda-
tions” for disabilities unless doing so would cause undue hard-
ship to the employer.


63

that role be carried out in a less costly manner and at the same time enhance U.S.
competitiveness?

To help you address these questions, you asked that we discuss our work on fed-
eral programs and activities, including the Labor Department’s role, in the areas of
(1) worker protection and (2) workforce development.!

In summary, our work suggests that although Labor has accomplished much over
its history, its current approaches to worker protection are dated and frustrate both
workers and employers. What is needed, according to the employers and employees
we spoke with is a greater service orientation: improved communication, increased
employers’ and workers’ accessibility to compliance information, and expanded
meaningful input into the standard-setting and enforcement processes. By develop-
ing alternative regulatory strategies that supplement and in some instances might
replace its current labor-intensive compliance and enforcement approach, Labor can
carry out its statutory responsibilities in a less costly, more effective manner.

Similarly, in the workforce development area, the nation’s job training programs
have become increasingly fragmented and unclear. Rather than a coherent
workforce development system, what exists today, spread across many federal agen-
cies, is a patchwork of federal programs with similar goals, conflicting requirements,
overlapping populations, and questionable outcomes. The roughly $20 billion appro-
priated in fiscal year 1995 for job training assistance to adults and out-of-school
youth is disbursed to 15 agencies, including Labor, which supports 163 separate pro-
grams. The current situation suggests that a major overhaul and consolidation of
programs is needed to create a more efficient, effective workforce development sys-
tem.

BACKGROUND

The purpose of the Labor Department, which was established as a separate execu-
tive department in 1913, is to “. . . foster, promote, and develop the welfare of
wage earners of the United States, to improve their working conditions, and to ad-
vance their opportunities for profitable employment.” This purpose has evolved into
two main Labor Department functions: ensuring worker protection, essentially
through regulation issuance and enforcement and enhancing workers’ skills through
job training.

The bulk of Labor's budget ($25 billion of Labor’s $33.8 billion fiscal year 1995
budget) is mandatory spending on income maintenance programs such as the unem-
ployment insurance program. (See table 1.) About $8.2 billion of Labor’s 1995 budget
js for enforcement of worker protections and workforce development—$1 billion is
for enforcing workplace standards for such areas as minimum wages, pensions, and
occupational safety and health; and $7.2 billion is allocated to employment training
activities. However, most-——about 10,000 full-time equivalent ( ) staff-years—of
Labor's 17,600 FTEs are dedicated to its labor-intensive worker protection efforts,
while about 1,800 FTEs are used to oversee its workforce development responsibil-
ities?

‘The Department has six units responsible for worker protections: the Employment
Standards Administration, the Pension and Welfare Benefits Administration, the
Office of the American Workplace, the Pension Benefits Guaranty Corporation, the
Occupational Safety and Health Administration, and the Mine Safety and Health
Administration. Together, they have 10,229 FTEs and a budget of $1 billion.

The Department's workforce development responsibilities are housed in the Em-
ployment and Training Administration and the Veterans’ Employment Training
Service. Together, they have a budget of about $7.2 billion and 1,800 FTEs. Labor
Department employment training programs include 20 programs authorized by the
Job Training Partnership Act (JTPA) for economically disadvantaged adults and
youth, workers who lose their jobs due to plant closings or downsizing, and an inten-
sive residential program for severely disadvantaged youth. Other activities include
support for the Employment Service, Apprenticeship Training, and the Veterans
Employment Program.

I] for a list of GAO's work related to Department of Labor functions, workplace
protection activities, and employment training programs.

Labor has experienced a long-term decline in staffing, from over 24,000 FTEs in fiscal year
1980 to 17,600 in fiscal year 1995.


20

ning $200 billion deficits each year could have a substantial impact
on the American work force and jobs in the next 20 years, correct?

Mr. REICH. I do, but Congressman, put this in context. When we
came into office, there was a $4 trillion debt.

Mr. SCARBOROUGH. Right.

Mr. REICH. That debt, in 1981, was $1.5 trillion.

Mr. ScarBoroucn. Right.

Mr. REICH. We have brought the deficit-GDP ratio, which is prob-
ably the most important thing to keep your eyes on, down from 5
percent—where the deficit was 5 percent of GDP—down to about
2.5 percent, 2.6 percent. We’re keeping it there; hopefully it’s going
to go down even further. But as Tone as we can get that deficit-
GDP ratio down and continue to keep it down and maybe get it
down further and get it on a downward trajectory, we are, it seems
to me, exercising fiscal responsibility, fiscal prudence.

What I worry, frankly, is that we end up throwing out the baby
with the bathwater.

Mr. SCARBOROUGH. Certainly, and I understand that. My only

uestion, excuse me, my question was, though, you do see a threat,
though. And this is taking Department of Labor and your budget
completely out of it. You do see the debt and the deficit as causing
a real threat to the American work force in the next 20 years.

Mr. REICH. If we had done nothing about it, if we had not al-
ready committed ourselves with detailed plans for $500 billion of
deficit reduction, and got a major head start on doing that; plus an-
other $140 billion, more recently, then I would worry.

But, Congressman, we are already on the road to major, major
deficit reduction, control over the debt. I would worry that exces-
sive zeal in cutting programs that help people become more produc-
tive in the future—and I’m talking now about job training, in par-
ticular—is a false economy, because if you cut programs that elp
people become more productive, then the denominator on the equa-
tion, which is economic growth, does not grow nearly as fast as it
ought to.

What we want to shrink is the deficit-GDP ratio.

Mr. SCARBOROUGH. Which leads—all these questions, actually,
are leading to a point, if you can believe it. And that is, if we aren't
going to abolish the Department of Labor or consolidate, is it pos-
sible for the Department of Labor to come forward with a bu
that spends no more the coming year than it spent last year, Be-
cause I noticed in your budget summary and I saw your charts
about how you all have been acting very responsibly since you took
office, and you’ve been moving in the Tight direction. Is it possible
in this year of tremendous budget crunches for you to—let's see, I
think you’re going up—spending increase is $5 billion and full-time
staff increases by over 300 people. Is it possible for you to stream-
line and reinvent government to such a degree that you don’t spend
more money the coming year that you spent this last year?

Mr. REICH. Congressman, we are continuing to make every effort
to reinvent, spend money in ways that go further and further with
each tax dollar. But we are only dealing with the tip of the icebe
in terms of the growing problem of the gap between people witl
skills, without skills; the problems of people who are facing work-
places that are substandard; the emergence in this country of



37

What I'd love to suggest is that maybe some members of the com-
mittee could come and visit with you, on an informal basis. We
could meet in your office or wherever and have a dialog about how
we can do a better job of helping you with what you say is your
most difficult challenge—this new world environment; and how we
can make the Department of Labor really attuned to this new need.

Mr. REICH. I'd be delighted, Mr. Chairman. And let me add, if
I may, just one additional point.

Mr. SuHays. Sure.

Mr. REICH. One of the largest job training programs in the Fed-
eral Government is now the JOBS program, administered out of
the Department of HHS, not the Department of Education, not the
Department of Labor. So there are cross-references, there are

joints of integration and collaboration that need to be undertaken

etween many departments.

Also, when you said that wages are declining for people at the
bottom, I want to make sure that for the record, I underscore the
equally troubling fact, and that is that wages are declining for the
average worker. Median wages, in particular, continue to be under
great stress. And the early indications are that between 1993 and

994, median weekly earnings dropped once again. We are in a re-
covery; the economy is showing every sign of continued buoyant
growth. And yet median weekly earnings declined. This should be
a cause for alarm across this Nation.

We have to be passionate about job training and skills.

Mr. Suays. Well, I think you have a—you’re in charge of a very
fascinating department with tremendous responsibilities. And this
committee looks forward, in particular, to working with the people
who work with you. You’ve honored us with your presence today,
and we will be, I’m sure, interacting with your top captains and
lieutenants during the next 2 years, and we look forward to that.

Mr. REICH. Great. Well, thank you, and I compliment you for
holding these hearings.

[The prepared statement of Mr. Reich follows:]

PREPARED STATEMENT OF ROBERT REICH, SECRETARY OF LABOR

Mr. Chairman and Distinguished Members of the Subcommittee:

Thank you for this opportunity to discuss the operations and programs of the De-
partment of Labor. I welcome the chance to engage in bipartisan dialogue on the
critical choices facing us in ensuring the best uses of limited public resources.

Your review could not be more timely. The Department has already embarked on
an extensive examination and reorganization of our programs and operations. We
have made significant changes to ensure greater accountability and efficiency in
what we do and how we do it.

And we have made a commitment: to fund what works, to fix or eliminate what
does not, to improve workers’ prospects and, with them, the prospects for our coun-
try’s future.

Background

However, we cannot examine the Department's programs and operations in a vac-
uum—they must be examined in the context of the larger forces that are reshaping
our economy. Five years from the turn of the century, America is facing enormous
challenges. We won the Cold War, but now struggle fo find a common purpose dur-
ing peacetime. We hurtled into the age of information, but now wonder whether the
communications revolution will bring us together or only deepen our divisions. We
saw our fundamental principles—democracy and free markets—affirmed throughout
the world, yet we are anxious about the resiliency of American values here at home.

backdrop—and indeed the root cause—of these challenges and anxieties can
be located, I believe, in the fundamental shifts now taking place in the global econ-


57

counselors falsified participant placement and retention records to fraudulently
obtain some $632, in JTPA program funds. The seven defendants in this
case, _aneluding three subcontractors, individually pled guilty to numerous Fed-
eral charges.

« Another investigation, conducted jointly with the Internal Revenue Service,
found that the former JTPA Director of the South Carolina Governor's Office,
Ishmael M. Holley, conspired with James E. Dennis, a multi-million dollar
JTPA contractor and Robert E. Scott, Jr, Dennis’ Comptroller, to accept pay-
ments to influence business transactions affecting STPA contracts. Holley and
Dennis pled guilty to these charges. Scott pled guilty to misapplication of JTPA
funds. They were sentenced to various terms of incarceration, home detention,
and probation. In addition, Holley was ordered to pay $45,000 in restitution and
@ $9,000 fine. The investigation identified approximately $294,000 in misapplied
JTPA monies. In addition, our Office of Audit questioned over $3 million in
costs.

Needless to say, Mr. Chairman, the OIG is of the opinion that, in this era of di-
minishing resources, it is vitally important that all Federal, State, and Local agen-
cies involved in the administration of the JTPA program exert leadership, in a con-
certed ifort to ensure that JTPA resources are not mismanaged, squandered, or de-
rauded,

The Job Corps Program

Another area where we have had some concerns is the Job Corps Program. The
Job Corps Program was created 30 years ago as a residential education and training
rogram to assist disadvantaged youth to be more employable, productive citizens.
it is authorized under Title IV of the JTPA and funded at over $1 billion per year.
‘The Job Corps can be an important tool in helping disadvantaged young men and
women to turn their lives around and increase their economic earning power. This
important mission, coupled with its cost, makes ensuring the program's success vi-
tal Hy important.
rough congressional testimony and OIG audit reports, my office has called at-
tention to “ ets of ineffectiveness” within the Job Cory gram that need to
be addressed by DOL before it continues to seek to expand the program with addi-
tional centers. One of the most important areas that we have identified in our au-
dits as iring attention has been the consistent, relatively low performance of a
number of centers. Using Job Corps’ own data, the OIG has reviewed the individual
performance of Job Corps Centers nationwide since 1987. Based on several perform-
ance indicators, the OIG has ranked the centers according to their overall perform-
ance. While a significant number of centers have sustained performance above the
national average in all or most of the performance indicators, there are a number
of centers that consistently perform below the national averages. The OIG has found
that, for the most part, the bottom-ranked centers place a smaller proportion of
their students upon termination, assist fewer students in obtaining their GED or
in achieving learning gains, have fewer students who complete their vocational
training, and have higher rates of students who have terminated the program but
whose status is unknown.

Because of this wide variability in center performance, an individual student's
chance to succeed may come down to “the luck of the draw.” We need to ensure that
every student who enters the Job Corps Program has an equal opportunity to suc-
ceed, regardless of which center he or she attends.

I believe that these problems must be resolved before any funds are spent on
opening new Job Corps centers. We are encouraged by Job Corps management’s re-
cent commitment to conduct, in conjunction with the OIG, a comprehensive review
of the best and worst centers to identify factors contributing to poor performance
to take corrective actions. Job Corps has also significantly revised its performance
standards for its centers in order to improve overall program performance. The OIG
will continue to monitor these developments and report on Job Corps’ progress, par-
ticularly as expansion of the program is considered.

Targeted Jobs Tax Credit Program

‘Mr. Chairman, as you may recall from my previous testimony before this Sub-
committee last September, as a result of our findings in a nationwide audit of the
Targeted Jobs Tax Credit (TJTC) Program, for the first time in the history of the
DOL-OIG my office called for the elimination of a program.

The TJTC program was enacted in 1978 to encourage businesses to hire members
of hand-to-employ target groups—predominantly the economically disadvantaged—
in exchange for Federal tax credits. We audited TJTC to determine if the program
is an effective and economical means of helping the target group members obtain



23

I see new programs coming up, yet we have 70 programs left on
the board which are being consolidated.

Mr. REICH. This isn’t a new program, and I apologize if I have
been unclear. The President’s proposed new G.I. bill for American
workers is, itself, the consolidation. It’s the use of the one-stop ca-
reer centers around which the consolidation is built. It’s slightly
more funding to make sure that dislocated workers and workers
who are low-wage can get the skills. But it’s built around the con-
solidation. The consolidation is part of thai plan.

Mr. MarTINI. Alright. Just one other question—I think you were
probably answering it when I was asked to go vote, and you may
have answered it, but you were beginning it. You talked about that
it’s the lower-end worker that’s having problems getting into the
system and advancing in the system, and it’s largely due to edu-
cation and skills and that many of the job opportunities out there
require a higher or more advanced skill.

And the question came up, with respect to the merger of the De-
partment of Education, and you were answering it when I left.

pM, Stays [presiding]. It’s going to have to be a short answer,
though.

Mr. MARTINI. It just seemed to me that as these jobs require
greater skills, there is a much closer alignment between these two

lepartments—the Education Department and the Labor Depart-
ment—in that area of education. To keep them separate, as we get
to a level of society where the job market requires even greater
skills, just—I haven’t been convinced by your testimony that
there’s a need to keep them separate there. And I don’t know if
there’s anything you could add to that to convince me, but——

Mr. REICH. Well, again, my two points are No. 1, that in my ex-
perience both in Washington and as a researcher of government,
my experience has been that merely moving the boxes around or
pushing different organizational units together and calling it some-
thing doesn’t accomplish a great deal in and of itself.

But No. 2, that there is a different focus and a different mission.
The Department of Labor is focused on specifically preparing work-
ers for specific jobs, and also protecting their safety and health and
pensions and many of their other needs. The Department of Edu-
cation, with regard to most of the education programs, focuses on
primary and secondary education which has local control, usually
community control. It is free public education. Its foals go far be-
yond the workplace; have to do with citizenship, democracy, com-
munity. It is a fundamentally different operation, although there is
obviously a relationship between the two.

Mr. Suays. Mr. Secretary, if I could, I see the sincerity in the
way you are looking at each other and this could go on for a long
time. It’s a very important issue, but I know other Members are
going to come back, and I’m going to try to honor my 3 o’clock com-
mitment to you. Mr. Fattah has the floor.

Mr. FaTTAH. Thank you, Mr. Chairman. Let me, first of all, com-
pliment you, Mr. Secretary, for the work that you've done; it’s good
to see you again. As you have mentioned, there are a number of
States who are moving forward with the one-stop centers, and
Pennsylvania has been in the forefront of that work; along with the
fact that we've realized early on through the Joint Jobs Initiative


90

* 1. Consolidation of JTPA IIA and JOBS for disadvantaged adults and welfare
recipients;

* 2. Consolidation of JTPA IIA, JOBS and the ES;

* 3. Consolidation of JTPA ITA, vocational education, and adult basic edu-
cation; and

« 4. Consolidation of six programs for dislocated workers under JTPA Title III.

Federal costs and savings of future consolidation policies will vary depending on
the amount of integration that currently exists for the programs in question. Since
there is no good source of information on the extent of integration at the state and
local level, we assumed there are three different hypothetical baseline scenarios:

+ Baseline Scenario 1: There is already total integration of administration and
service delivery for the included programs, at both the state and local levels.

* Baseline Scenario 2: There is already integration of service delivery at the
local level, but at the local and state levels administration is handled separately
for the included programs.

« Baseline Scenario 3: There is currently no integrated service delivery or ad-
ministration for the included programs.

The bottom-line implication is that potential administrative savings of federal con-
solidation would depend on how much and what type of integration there already
is across the nation at baseline (i.e., before the implementation of any federal con-
solidation). If most states currently operate programs separately, then the consider-
able up-front costs associated with implementing consolidation would exceed any
savings. Any savings would only appear in the long run. If most states currently
integrate service delivery but not administration, there could be some small savin,
in the short run. It is not clear what time period should be used to determine the
long run, but Iowa administrators estimate that even after several years, the pro-
jected savings are not expected to offset the costs of the initial up-front investments
required to implement the consolidation that they are currently attempting.

ne point is particularly important to note. According to officials in several states,
it is possible that both the up-front costs and the long-run savings of reconfiguring
computer systems may be significant (although states are not yet able to provide
information on the range of potential costs or savings). However, given the rapid
technological changes and the priority given to developing high performance work-
places, the total costs of upgrading computer technology and management informa-
tion systems, even if initiated by a program consolidation, should not all be attrib-
uted to the consolidation. Public agencies, like private companies, are increasingly
expected to maintain ongoing review, redesign, and upgrading of technology.
ven under scenarios where there could be some administrative cost savings,
though, the amount of savings is not likely to be Et, Much of the expected federal
savings would occur at the state level, but total federal expenditures on administra-
tive costs incurred at the state level represent a very small percentage of total pro-
am costs to begin with (generally one to two Percent of all federal costs). Even
if half of all administrative costs at the state level were saved as a result of federal
consolidation, that would still represent only about one percent of total federal pro-
gram expenditures for all programs consolidated. Under the best-case scenario,
there might also be some small federal savings at the local level. If 20 percent of
the local administrative costs could be saved, this might translate into a savings of
2-4 percent of total federal program expenditures for all programs consolidated. For
JTPA Title IIA and the JO! rogram were totally consolidated and if
‘istrative costs could be reduced y one-third, that would represent about
$127 million in federal budget savings, recognizing that some of this potential sav-
ings would be offset by investments needed to implement such a consolidation (e.
computers, personnel policies, program reporting procedures). This conclusion of lim-
ited savings resulting from consolidation is consistent with the experiences de-
scribed by state administrators. They generally indicate that the motivation for con-
solidation is not reducing budgets but improving customer service and overall oper-
ational efficiency. For example:

‘© West Virginia, by integrating and sharing staff in local employment service
and unemployment insurance offices, reduced the total number of staff positions
and the total dollars expended from the Unemployment Insurance Trust Fund.

« Iowa is integrating the services delivered by six state agencies that admin-
ister employment and training programs. This initiative has reportedly realized
savings in terms of rent as a result of co-location (e.g., in one local community,
rent was reduced by $48,000 per year); and savings of $350,000 are expected
by consolidating and fully automating ten separate intake procedures and relat-
ed forms. Up-front costs include about $500,000 for a professional contract
called Business Transition Planning, and other costs associated with redesign-
ing data and management information systems. Iowa expects that the costs per



44

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85

Mr. FIscu. Yes.

Mr. CRAWFORD. Yes.

Mr. Towns. And that bothers me too. Let me be right up front.
I don’t see the kind of regulatory constraints that would make me
feel comfortable in terms of this whole block grant situation as to
what happens at the other end when the State gets hold of the
money. I just don’t see—I just don’t feel comfortable in terms of
what I have seen and what | have heard up to this point.

Mr. FiscH. When JTPA was enacted, it came off the Hill as a
block grant. Within 2 or 3 years, our investigative case load was
eating up about 45 percent of our resources because of the fact that
there was no accountability with the money that went down to the

tates.

Mr. Towns. We make mistakes up here, no question about it.

Mr. Suays. If the gentleman would yield.

Mr. Towns. Yes, I yield.

Mr. SHays. We are going to have a roll call vote, and I would like
Mr. Souder to get his 5 minutes.

Mr. Towns, I would be delighted to yield to him.

Mr. SoupDER. I would point out that the criticisms you have had
of the Federal programs are so devastating, while it is hard to
imagine the States being much worse, but we need some kind of
accountability at the State level, but overlap, duplication, wasted
resources, poor service quality, confusion by clients, employers, ad-
ministrators, and all that is a pretty devastating indictment of the
Federal as well.

I merely would like to ask that—Mr. Crawford, you have a chart
that then further elaborates on this one. Do you have and could
you put together so we would have it for our information, you have
the number of these programs that are in the Labor Department,
where you could print out like you did on the supplementary mate-
rial with the descriptions of what other departments have youth
Programs and what those are? Do you have that type of —

ir. CRAWFORD. Yes, we have that type of information.

Mr. Suays. If the gentleman would yield, you have a report on
this whole program that does exactly that?

Mr. CRAWFORD. Yes.

Mr. Suays. And it boggles the mind.

Mr. SoupeEr. Yes, because we are trying to deal with the same
thing over in the Education and Economic Opportunities Sub-
committee on work force, and it is a nightmare trying to get a han-
die on this stuff.

Mr. Suays. We will get it for you.

Mr. CRAWFORD. We will give you a copy—make sure you get a
copy.

Ne. Souber. Thank you for your testimony.

Mr. Suays. I would like to thank all three gentlemen for testify-
ing. You have given us a tremendous amount to focus in on. The
tax credit alone we could take a good look at, but every one of the
areas would justify an independent hearing. Thank you for the
work that you do for our country.

We will call our next witnesses after we have had an opportunity
to vote, and we will be back shortly. So we are recessed.

cess.


62

alternative regulatory strategies, more employer and worker re-
sponsibility in ensuring workplace protections. And the next area
would be greater technical assistance, toll-free telephone numbers,
better education programs for employers and educate—and for the
workers.

Shifting gears to the employment training board, you will see as
you begin to look at what to do with Labor and the programs, you
will see that Labor has about a quarter of the programs and about
a third of the dollars in the multiple employment program area.
When we looked at those 163 programs, the consistent message we
found was the programs confuse workers, employers, and adminis-
trators; they provide overlapping services; they waste resources;
and little is known about whether or not the programs actually
help people.

Taking a look at three pr ms—and I'll just cover them very
quickly since the IG addressed much of this in his statement—they
tell a very interesting story, and I'll just use some phrases. When
you look at the youth programs, dislocated worker programs, and
disadvantaged programs, these phrases come to mind: Ineffective,
low program performance, inconsistent, little is known about re-
sults, modest gains at best.

We believe that there are also opportunities here to improve the

ality and also save money. Through the consolidation of many of

these employment training programs, we think that savings are
likely to derived. We would argue though that, as you work
through this issue, Labor’s role in this new process needs to be
clearly defined.

In conclusion, there are opportunities to improve service and re-
duce cost in both the worker protection and work force development
functions by rethinking Labor’s role—rather, the Federal role,
which includes defining Labor’s part in the new system.

When you talk to private sector experts about redesign and
change, one of the things that they say is that accompanying deci-
sions to reduce costs is also a requirement that you begin to
rethink what it is that you are doing and what your business ac-
tivities are.

Mr. Chairman this concludes my oral statement, and I will be
happy to answer any questions that you or other members of the
subcommittee may have.

Thank you.

[The prepared statement of Mr. Crawford follows:]

PREPARED STATEMENT OF CLARENCE C. CRAWFORD, ASSOCIATE DikEcTOR, EDU-
CATION AND EMPLOYMENT ISSUES, HEALTH, EDUCATION, AND HUMAN SERVICES Di-
VISION, U.S. GENERAL ACCOUNTING OFFICE,

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to assist the Subcommittee as it looks for ways
to improve the activities at the U.S. Department of Labor, while making the Depart.
ment a smaller, more effective agency.

Over the years, the federal government and the, Department of Labor have con-
tributed sighificantly to work fife quality in America by improving working. condi.
tions and worker-management relations and improving workforce skills. However,
the ever increasing pace of change in the economy, the globalization of markets, the
workforee’s increasing skill requirements, and changing emplayer-employee rele.
tions have presented new demands and challenges to the federal government's tradi-
tional roles and approaches. This raises the questions: What should the federal role
be today in ensuring worker protections and workforee development, and how can


86

Mr. SHays. I would like to reconvene this hearing and call on our
witnesses.

Do we have witnesses? If we do, I would like to call them. Please
come up. While you are still standing, I'll save you the opportunity
of sitting down. It is nice to have all three of your here.

Our witnesses are Burt Barnow, Nancy Pindus and Demetra
Smith Nightingale. If you would raise your right hand.

{Witnesses sworn.]

Mr. SHays. Ms. Pindus, we will start with you. As has already
been agreed to by unanimous consent, your full testimony will be
included in the record, and you can summarize it, you can refer to
parts, of it, or you can do what you choose. We will start with you,

s. Pindus.

STATEMENT OF NANCY PINDUS, URBAN INSTITUTE, ACCOM-
PANIED BY DEMETRA SMITH NIGHTINGALE, URBAN INSTI-
TUTE; AND BURT S. BARNOW, PRINCIPAL RESEARCH SCI-
ENTIST, INSTITUTE FOR POLICY STUDIES, JOHNS HOPKINS
UNIVERSITY

Ms. PINDUS. Thank you to the subcommittee for the opportunity
to speak today. I’m accompanied by Ms. Demetra Nightingale, a
coprincipal investigator on the study that we are discussing today.

Mr. SHays. Let me ask a favor. Would you turn the mike down.
Just bend it down more, and is it on?

Ms. Pinpus. Yes.

Mr. SHAYS. Sorry to interrupt you.

Ms. PINDUS. The recent focus on redesigning Government pro-
grams to be more responsive to the needs of their customers has
encouraged initiatives to improve program efficiency. A related con-
cern is whether, and by how much, consolidation of Federal fund-
ing streams would result in cost savings.

‘he Urban Institute has completed a preliminary study for the
U.S. Department of Labor to identify potential administrative sav-
ings that might be expected from various program consolidation
models. The conclusions presented here are considered preliminary
and tentative mainly because of data limitations and differences in
definitions across programs. For example, while most programs
maintain data on administrative costs, the definitions of what ac-
tivities are included in the administrative versus direct cost cat-
egory vary. By sharing our findings with you today we hope to pro-
vide an understanding of the conceptual framework and operating
assumptions that can be used to further examine this complex
issue.

The policy decision about whether to consolidate or not should,
ideally, begin with an assessment of the overall value of each pro-
gram. Does it make sense to consolidate various existing programs?

joes each program have a clear purpose and mandate? Are the ex-
isting mandates and objectives of individual programs compatible
with, duplicative of, or inconsistent with other programs?

Administrative savings that result from consolidation can either
offset costs of the overall program, thus resulting in real program
cost reductions, or be redistributed from administrative activities to
direct service activities. The benefits, then, can either be measured


31

Mr. CHRYSLER. Thank you. I’ve got to run to vote.
[The information referred to follows:]

Transmitted herewith is the information that was requested concerning grants to
labor unions and public interest groups in FY 1994 from the Department of Labor.
Please note that in FY 1994 we did not provide any grants to the National Endow-
ment for Democracy.

DISCRETIONARY GRANTS
‘Agency: Assistant Secretary for Policy—FY: 1994

ei
Grantee fart mount Purpose Diet
No
George Meany Center for Labor Studies, Inc. S164 $500,000 Establishment of No 80
Substance Abuse
Institute

U.S. DEPARTMENT OF LABOR—EMPLOYMENT AND TRAINING ADMINISTRATION LIST OF
CURRENT NON-GOVERNMENTAL DISCRETIONARY GRANTS & COOPERATIVE AGREE-
MENTS WITH PUBLIC INTERESTS GROUPS AND LABOR UNIONS

SINCE OCTOBER 1, 1993

Economic Dislocation Worker Adjustment Act (EDWAA}—Technical Assistance & Training
Projects Funded Under the Authority ot Job Training Partnership Act JTPA) Title Il

TCP MME UOSE Dare oF OraTEW ye

Human Resources Development institute ..
To solidity a working partership among business, labor and goverment in
support of JIPA programs. Some specific activities include encouraging
labor involvement in the state and local councits established under JTPA
‘and training of labor movement individuals to be knowledgeable and ac-
tive members of the JTPA system.
US. Steetworkers of America
Planning grant (Phase |) to conduct a survey to identify dislocated steel-
workers in four States who have, heretofore, not been served by JTPA and
to develop a project plan and program coordination agreements to provide
services to these workers in Phase Il. Phase Il, if implemented will provide
services to workers identified in Phase |.

1-JUL-92 30-JUN-95 2,500,000

1O-MAR-35 10-JUN-95 150,000

TECHNICAL ASSISTANCE AND TRAINING (TAT)
Projects Funded Under the Authority of Job Training Partnership Act UTPA) Title IV Part D

DATE OF EXPIRATION FY 1954
RECIPIENT NAME/PURPOSE, HARD ate JOINT
National Association of Counties... . 15-MAY-93 30-APR-95 360,500"

National Conference of Black Mayors...
National Conference of State Legislatures
National Governor's Association .
US. Conference of Mayors .
Funding for these grants to provide continued support by these Public Inter-
‘est Sroups (PiGs) to States, counties and cities in carrying out the require-

ments of JTPA. The basis of these grants is information exchange.

‘ Additional funds 10 be provided trom FY 1994 dollars.
‘Ato partially funded with EDMAA funds.

15-MAY-9330-APR-95  206,000*
15-MAY-93 30-APR-95 256,000*
1S-MAY-93 30-APR-95 407,055*
IS-MAY-93  30-APR-95 257,500"



7

does not, in my view and in the view of the administration. The
studies show it does not, a modest minimum wage increase of 90
cents. And we can get into that if you will.

But let me just move on to the next issue, which is job training,
because although the minimum wage may be helpful for people at
the bottom, ultimately, as I pointed out before, there is a greater
and greater correlation between your wages and also your level of
skill.

For every level of formal education, this chart shows that median
weekly earnings of young workers increased with some training, in
addition to the level of formal education. And we can get into the
details if you wish. I just want to make my point as graphically as
possible: job training does work.

Now, it is true that there are certain occupations and there are
certain groups, such as disadvantaged teenagers, for whom very
short-term job training does not work, but longer term job training
does work. And in general, job training does have a positive influ-
ence on wages. Next, please.

Mr. SHayS. Could you define job training.

Mr. REICH. We are talking about job training as any vocational
course of instruction, directly related to gaining job skills, outside
of a formal degree program.

The President has proposed to consolidate more than 70 job
training programs. Now, there are a lot of numbers flying around
as to how many job training programs there are in the Federal
Government. The GAO, General Accounting Office, has come up
with one estimate. There are different estimates. Let me warn the
committee, however, that there are apples and oranges in many of
these estimates.

The GAO figure—and the GAO, by the way, has been enormously
helpful to us. I don’t want to in any way imply that the GAO has
not been. But their figure does include every program you can
imagine, such as vocational rehabilitation programs for veterans,
such as small business assistance programs for entrepreneurial
skills. There are many programs that really don’t deal with broad-
based, general job training. We're talking about the job training
programs that are across the board.

Mr. CHRYSLER. How many programs is that?

Mr. REICH. Our estimate is that there are closer to——

Mr. CHRYSLER. Their estimate.

Mr. REICH. Oh, their estimate. They submitted one estimate, I
believe, that was in the range of 140 or 150. They revised that esti-
mate upward. Our estimate, with regard to core job training pro-
grams, is closer to 70.

And what the President is proposing to do is consolidate those
70 programs. Some of them are for adults, and you can see the two
groups at the chart are the adult job training and the two groups
at the bottom are the youth job training—those out of school youth,
by and large; there are some in-school youth.

And what the President is proposing is a consolidation that
would enable workers and young people out of school to get all of
the training they needed in a far more streamlined way. We can
get into the details of this.


46

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6

trend and fact, what is happening in America. And this is why in-
vestments in education, investments in job training, investments in
skills are more important today than they have ever been in our
history. Next graph, please.

At a time when Congress is struggling with the question of how
to get people off of welfare and into work, this particular graph is
particularly powerful and important. You see here that the hourly
earnings at the bottom 10th percentile, between 1973 and 1993—
and by the way, the 1994 figures are just being analyzed, but earl
indications are that the trend you see there, that downward trend,
continues—those hourly earnings have been trending downward.

Adjusted for inflation—now, this is all adjusted for inflation—
this is from the CPS, the current population survey of the Bureau
of Labor and Statistics. In 1993 dollars, people are having a harder
and harder time making ends meet. And in fact, the graph that I
did not bring, but is also quite telling, the percentage of families
who are working families—that is, where there is at least one full-
time worker—the percentage of those working families that are in
poverty is going up.

In the 1990’s, over 11 percent of working families are not earning
enough to keep out of poverty, as the government defines poverty:
minimally adequate—minimally adequate—food and shelter and
clothing. In the 1970's, it was only about 7 or 7.5 percent. In the
1980's, it was about 8.5 or 9 percent. Now, more than 11 percent
of families with a full-time worker are not out of poverty. People
are playing by the rules, they are working hard, and yet they are
falling further and further behind.

Apropos of this chart, Michael, is the next one. You see the rela-
tionship between this chart, which shows the real minimum wage,
the inflation-adjusted minimum wage and the chart that I just
showed you, in terms of the bottom 10 percent. There’s almost a
direct relationship. Inflation adjusted, in terms of real purchasing
Power, the minimum wage has dropped by about a third since

You see in 1989 a majority of Republicans and a majority of
Democrats voted for a 90-cent increase in the minimum wage, the
same as the increase that the President is now proposing. But you
also see that that increase that was voted on in favor and was
passed into law has been eroding because of inflation. Indeed, at
east half of that increase has already eroded because of inflation.
It is, in my view and the President’s view, vitally important that
we make work pay.

If we are serious about getting people off of welfare and into
work, we must, at the bottom, make sure that people can earn
enough to get by. We are talking about the difference between
$8,500 a year for a full-time worker and $10,300 a year for a full-
time worker. These are not Leenagers working part time from mid-
dle-class families. A majority of these people are adults; 60 to 70
percent are over 20 years old. And the average minimum wage
worker—the average minimum wage worker—is bringing home
half of family earnings.

But raising the minimum wage is not nearly enough. And by the
way, I’m happy to get into the question with the committee as to
whether raising the minimum wage has any negative job effects. It


40

Our achievements in protecting American workers cannot be compromised by
slashing resources at random or imposing unworkable, rigid rule-making require-
ments without regard to saving the lives of those that entrust us with protecting
their health and welfare.

Reinventing DOL

The Department's budget and program priorities, such as those I discussed above,
reflect our commitment to reinvention, Its important, to recognize thet the Depsrt-
ment’s employment levels have fallen from nearly 24,000 in Fiscal Year 1980 to ap-
proximately 18,000 in Fiscal Year 1993, a drop of 25%. At the same time, U.S. em-
ployment has grown from 90 million to approximately 125 million. But we've made
great strides, not only in downsizing the department-—with nearly 1,000 fewer em.
ployees over two years—but in changing the way we do business. When we started
to take a good, hard look at what we could improve, we made some dramatic
changes. For example:

* the Pension Benefit, Guaranty Corporation developed a new program that
enabled them to find 12,000 missing pension beneficiaries—people entitled to
pensions they would not have gotten otherwise.

* Out in the state of Washington, the Department of Labor joined forces
across agency and sector lines to make sure laid-off Boeing Aircraft employees
got the help they needed to find new jobs. The one-stop career shop the partners
set up on-site at Boeing was up and running even before the company laid off
19,000 people.

© Because people and communities facing base closings and loss of employ-
ment have enough to contend with as it is, they don’t need long waits, bureau-
cratic red tape, and uncertainty about where to get help. So we sent in “swat
teams” of job assistance counselors to communities where military bases were
scheduled to be closed, giving people rapid, on-the-spot response to their reem-
ployment needs. Last year alone, DOL helped an estimated 35,000 workers
through defense conversion and diversification efforts.

Here at DOL, we saved $66.4 million net by reviewing the rolls of federal
employees on, long-term workers’ compensation, Through such “periodic roll
management,” we expect to save an additional $230 million from now through
2000.

We actively initiated reinvention efforts in each of our program areas by focusing
on how we could improve existing work processes so as to more effectively serve the
American workforce. By focusing on improving customer service, empowering em-
ployees, cutting red tape, and getting back to basics, the Department has been able
to use resources more fully while at the same time eliminating unnecessary proc-
esses and burdens.

We have leveraged limited federal and state resources by forming federal-state
partnerships and targeting investigations. For example, the State of Maine had inci-

lence rates of workplace injuries and illness that were 71% greater than the na-
tional average. Through the use of workers’ compensation data, the 200 most dan-
gerous workplaces were identified and each was asked to cooperate with OSHA to
improve their workplace safety and health programs. The vast majority of work-
places participated in this program and identified over 95,0000 instances of hazards,
with 55,000 of these already eliminated. This number is more than twice the num-
ber of hazards OSHA has cited during 1,316 inspections performed during the pre-
vious eight years.

The Department is already ahead of schedule in reaching the National Perform-
ance Review targets of reducing the overall number of employees and redirecting re-
sources from overhead to front-line, customer service positions. A cumulative reduc-
tion of 1,037 FTE has been achieved through FY 1996.

The Department is actively embarking on the second phase of the National Per-
formance Review. We are closely reviewing our operations and seeking to improve
the ways we carry out our varied missions—as with our new and varied approaches
to ensure the safety and health of Americans in the workplace. Similarly, the Skill
Grants contained in the proposed G.I. Bill for America’s Workers would turn over
decisions on job training to the customers themselves—American workers.

To complement our reinvention efforts, we are reviewing the manner in which we
promulgate regulations with an eye to reducing or eliminating unnecessary regula-
tions, and adopting different models for achieving our regulatory objectives with an
emphasis on minimizing federal governmental intrusion. I have asked each agency
head to review and evaluate all existing regulations to assess their impact on bo
employers and employees, and take the necessary actions to improve the regulatory
process. Our answer to allegations of “regulatory-zeal” by enforcement, agencies is
to weed out overly specific and obsolete regulations, not to prevent those charged


19

It is not just a matter of preserving the Labor Department. It is
a matter of providing pathways for Americans to better lives. It
undergirds everything we want to do in government. It should not
be a partisan issue. Tn fact, in the past, it has been a bipartisan
issue. And I’m hoping and trusting that we can continue to make
these goals that I’ve listed bipartisan goals.

Mr. SCARBOROUGH. I’m curious what you would think of Alice
Rivlin’s proposals a few years back when she was writing for
Brookings, talking about moving some Federal functions back to
the States. And you, of course, have stated that the safety net, in
so many words, the safety net may not be provided for workers at
the State level.

Would you agree with Ms. Rivlin that there are some things that
we can move back to the States? In fact, she went far beyond say-
ing some things; it was a very expansive view that, I believe, if you
read her book, would include many things that the Department of
Labor now heads.

Mr. REICH. I don’t have her—unfortunately, I don’t have her
book in front of me, and I don’t recall specifically what she sug-
gested. But let me give you very, very quickly my views on bloc!
grants or on moving—or on devolution, and I think they’re dif-
ferent. With a block grant, you are taking Federal tax dollars and
giving it to the States.

Mr. ScarBoroucu. Right.

Mr. REICH. The problem there is that you are not necessarily
achieving accountability. In fact, you may be moving away from ac-
countabi ity. There’s no reason to think that a State bureaucracy
handling ‘ederal dollars is going to be more responsive to tax-
payers than a Federal bureaucracy handling Federal dollars.

r. SCARBOROUGH. OK. You had said in your testimony that
what the Department of Labor has been trying to do is to “push
responsibility downward and out into the field.” Is that consistent
with your approach here, where you're saying if we return it to the
States—isn’t returning it to the States actually pushing it down-
ward and closer out into the field? With, of course, a Department
of Labor or some agency making sure that minimum standards
have to be met by the State.

Mr. REICH. Well, again, accountability is the word that comes to
mind here. If we can figure, in any area of governments, a way of
ensuring that the Federal tax dollars are being properly spent and
that customers are genuinely being serviced, then I would be in
favor. This is why a skill grant or voucher approach to job training
seems to me to be so attractive, because we are doing the best of
all worlds. We're giving to individuals the power to get the edu-
cation and training they need. They are adults; they can make
those decisions, armed with good information.

We don’t have to choose between Federal or State bureaucrats.
There is no reason to assume that State bureaucrats are going to
be better than Federal bureaucrats in deciding what people should
learn and what kind of job training they should get.

Mr. ScarBoroucu. OK. Let me ask you another question. If we
move away from abolishing the Department of Labor, and we move
away from consolidating the Department of Labor, obviously, you
realize—well, you’d agree with me that a $4 trillion debt and run-


4

uary. That’s net new jobs. And those jobs, by the way, are paying
better than the average existing jobs.

The problem is the 110 or 115 million existing jobs are starting
to split between a relatively few paying better and better and a
much larger number paying worse and worse. And that’s where
you're getting a lot of the polarization in the work force.

Mr. SANDERS. Thank you.

Mr. SHays. Mr. Davis. I'd just like to say that I want the prayers
and the protection of all my colleagues, because I asked the rank-
ing member if he would anticipate the next vote, being a roll call
vote. And he thoughtfully went to a roll call vote that was never
asked for. So I’m going to give him 7 minutes when his turn comes.
[{Laughter.]

Mr. Davis.

Mr. Davis. Thanks. Thank you, Mr. Secretary, for your presen-
tation. I was grateful to see the one about a college education and
how much more income its average, because my son is here today—
school day is off in Fairfax—and I wanted him to see that as we
talk about the importance of education.

I’ve been really pleased about the establishment of two programs
in your department—the Women and Apprenticeships in Non-Tra-
ditional Occupations Act and the Non-Traditional Employment for
Women’s Act Programs. They were both established with biparti-
san support. I think they’ve shown real potential as we move for-
ward on welfare reform.

But given the proposal for consolidating many employment and
training programs into the G.I. Bill of Rights for American work-
ers, I want to ask how these efforts are going to be continued at
this point?

Mr, REICH. Yes, Congressman. Just quickly, two points. With re-
gard to the fiscal year 96, the President, as I indicated in my re-
marks, has proposed consolidating the Women and Apprenticeships
in Non-Traditional Occupations Program, as well as many other
small programs, into the adult work force system that I outlined
a moment ago. And that is part of what we are calling the new G.I.
Bill for America’s workers.

Now, in States that establish one-stop career centers, local com-
munities can provide outreach for women and apprenticeship ac-
tivities, along with many other activities. We would not support,
this point, a set-aside for this or other small programs that are
being consolidated because one of the problems we’ve had in the
past is the proliferation of many of those small programs.

I just want to say one word about the Non-Traditional Occupa-
tions Program, as well. With regard to non-traditional occupations,
there has also been a pilot project underway. And that pilot project
has been funded out of our pilot project fund, but that fund ‘has
been caught in the current round of recisions. The Pilots and Dem-
onstrations has been cut by $10 million, actually, in the current
round of recisions. So we will need to examine our priorities with
regard to non-traditional employment for women.

I’m hoping that we can continue to fund it, but given that very,
very sharp cut in recisions that was passed by the House, we're
going to have to really stretch to make sure that we do that.


3

Mr. Suays. Mr. Secretary, if I could, if you would stand up—we
swear in all our witnesses, everyone who comes before the commit-
tee is sworn in.

{Witness sworn.]

Mr. SHays. Thank you. Mr. Secretary, before we ask you to
begin, we have the ranking member of the committee, Mr. Towns.
And, Mr. Towns, we're going to insert, without objection, any of the
statements that Members have. But I’d love to have you make a
statement before the Secretary if you'd like.

Mr. Towns. Mr. Chairman, what I would like to do is just get
permission to include my statement in the record, and we just
move right into the hearing. I’m so anxious and eager to see in
terms of what the Secretary has to say. These are very difficult mo-
ments, and we're trying to reform welfare and we're trying to do
a lot of things that I think it creates a tremendous burden on the
Secretary of Labor because of the fact that when we do these
things, that he will need a lot of support.

So I want to see in terms of some of the ideas and plans that
he has, and see what we can do together to sort of soften the blow
of people that need assistance. So I yield back, Mr. Chairman.

[The prepared statement of Hon. Edolphus Towns follows:]

PREPARED STATEMENT OF HON. EDOLPHUS Towns, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NEW YORK

T thank you, Chairman Shays, for scheduling this hearing which I know you have
planned as a candid and balanced first look at department of labor operations and
meaningful discussion of its future. For that reason, I am pleased to join you in wel-
coming the Secretary of Labor before this subcommittee.

The reinvention of government as it pertains to this agency will touch the lives
of every American. The committee's oversight of D.O.L. operations, as well as any
reform initiatives under consideration is critical to the social and economic vitality
of this country.

However, Mr. Chairman, it seems to me that in light of the “Contract with Amer-
ica” and the underlying goals set out by the Republican leadership, whatever conclu-
sions we reach here, and whatever recommendations we ultimately make will be
meaningless.

We met with the HUD Secretary one day—then watched that agency’s 1995 budg-
et get cut by $7 billion a week later. We met with Secretary Shalala last week—
when legislation ransacking critical programs for poor women and children was
under consideration the week before.

Today, although we have invited Secretary Reich before us to testify about his
agency's activities and plans for the future, the GOP-engineered rescissions package
gutting his agency by $2.3 billion will be up for consideration on the floor before

e month is out.

What reasonable body would develop a welfare reform plan, imposing a massive
work mandate on States by requiring them to move 50% of their welfare recipients
into jobs, and at the same time cut the employment and training programs provid-
ing ese people the necessary work skills?.

early, we don’t need to waste any effort examining D.O.L.’s mission, Mr. Chair-
man. We would be much better served examining our own agenda.

Mr. Secretary, I appreciate your hard work and look forward to your views on the
future of your agency and the population you serve, both as you have planned, and

sibly as a casualty of the republican “Contract with America”. I am particularly
interested in your progress toward restructuring D.O.L., but invite your comments
on how your progress can be advanced by this 104th Congress.

Mr. SHays. Thank you. Mr. Scarborough, do you have a state-
ment that you'd like to make?

Mr. ScaRBOROUGH. No, not at this time.

Mr. SHays. OK. Mr. Lantos.



69

cational deficiencies (such as being a school dropout or lacking reading or math
skills) and other employment barriers. The Job Corps funding for fiscal year
1995 is $1.1 billion, an increase of $59 million over 1994. The increased funding
is earmarked primarily for program expansion—through increasing the number
of Job Corps centers. However, the Department's Inspector General has pointed
out in recent testimony relatively low program performance at some centers and
the need for overall :m improvements.®

¢ The JTPA Title IIB Summer Youth program targets disadvantaged youth
14 to 21 to expose them to the world of work, enhance basic education
ills and citizenship skills, and encourage school completion. The program was
appropriated about $1.06 billion in fiscal year 1995—an increase of $168 mil-
lion—and, according to Department estimates, will serve over 620,000 partici-
pants. Two recent studies concluded that the program succeeded in providing
participants with work experience but that the remedial education component
was not being consistently applied throughout the nation.®

DISLOCATED WORKER GROUP

« At $1.3 billion, Labor's largest training program provides employment train-
ing aseistance to dislocated workers. I received increases of $516 million in fis.
cal year 1994 and $178 million in fiscal year 1995. We determined that this pro-

am has had difficulty spending its allocations, carrying over funds of $54 mil-
lion from fiscal year 1983 to 1994. However, little information is available on
whether this program is making a difference—-that is, we do not know if partici-
pants are more likely to find jobs than nonparticipants.

ECONOMICALLY DISADVANTAGED ADULTS GROUP

* The JTPA Title TIA program provides employment training services to eco-
nomically disadvantaged adults to enable them to enter and advance in the
labor force. The program was funded at $1.06 billion in fiscal year 1995, a $57
million increase over 1994. Although a recent study indicated that the program
had generally positive, although modest, effects on the earning and employment
of participants,1® its growth alone may warrant revisiting the program.

OPPORTUNITIES TO SAVE MONEY AND IMPROVE SERVICE QUALITY

We are convinced that a major overhaul and consolidation of the 163 programs
is needed to create a more effective workforce development system and that Labor's
role in this new system must be clearly defined. Although the amount of money
spent on administrating these programs cannot be readily quantified and is gen.
erally not even tracked by program, administrative costs are substantial. Therefore,
comprehensive consolidation and streamlining of these programs could likely result
in substantial budget savings in future years and improve the assistance provided
to participants.

CONCLUSION

The Department of Labor's worker protection functions touch the lives of nearly
every American, Its approaches to carrying out these functions may have met the
needs of an earlier time, but today’s work world presents new demands and chal-
lenges to the federal government’s traditional role and approaches. Clearly the old
ways of doing business are inadequate, and new, less costly, more effective means
of ensuring worker protections are needed.

In light ofthe fragmented, duplicative workforce development programs that have
evolved over time, we believe a concerted effort is needed to overhaul and consoli-
date programs to’ create an effective and efficient workforce development system.
Moreover, as the Congress is considering proposals to convert many programs to
block grants to ‘streamline and achieve coat savings, we believe an opportunity ex-
ists to rethink and better define the federal workforce development strategy and La-

s role in it.

®Statement by Charles C. Masten, Ingj General, U.S. Department of Labor, before the
SPAuaIL of ie 1998 Summer Youth Employment and Training Program, US. D f
udit of the Summer Youtl a ining m, U.S. Department ot
Labor, Office of Inspector General, (Washington, D.C: Feb. 24 1993), and Study of the JTPA
‘Tide [1B Program During the ‘Summer of 1993, Westat, Inc. (Apr. 1994).
10The National JTPA Study: Title IIA Impacts on Earnings and Employment at 18 Months,
Abt Associates, Inc. (Jan. 1993).


24

in 1987, under Governor Casey and the legislature, we created a
process in which the Welfare Department, the Labor Department.
and the Education Department worked together around some is-
sues, collaborative efforts not by merging the departments, because
there are distinct responsibilities, but pulling people together in
ways in which it made sense. And the one-stop centers and some
of the other innovations in Pennsylvania are a result of that.

I’m interested, however, in your comment on another matter at
the moment—the Chamber of Commerce in Pennsylvania and a
number of other entities, when conducting a study around issues
of productivity in the State, indicated that one of the greatest chal-
lenges that they felt we faced in terms of the work force was the
issue of diversity and having people have the ability to work to-
gether, coming from different backgrounds, races, religions, regions
of the State.

And there is on the Hill now, and here in Washington, a great
deal of debate about how much effort on the part of government is
worthwhile to include women and under-utilized minority grow
members in the workplace. I’d be interested in your comments rel-
ative to affirmative action in this challenge in the American work-
place.

Mr. REICH. Congressman, this administration—I, the President,
the entire administration, believes firmly in the goals of affirmative
action, ensuring that employers make every extra effort to find
qualified people who don’t look just like them. I think there’s a nat-
ural human tendency, and I don’t even suggest that there is ex-
plicit prejudice, racism, sexism, but there’s a natural human tend-
ency for people to want to replicate themselves when they hire and
promote employees.

And it’s necessary to make the extra effort to cast the net more
widely. We’re not talking here about quotas; we’re not talking here
about preferences. We're talking about goals and plans and efforts.
Most of the laws and regulations that we are enforcing have to do
with plans and goals and efforts. And we're going to continue to re-
view those laws and regulations to make sure that they are achiev-
ing their ends. Obviously, we have to make sure that they’re effec-
tive. But we are not going to retreat from the purpose, which is to
end discrimination, to end sexism and racism to the extent possible
in our society.

I’m going to be very shortly unveiling the results of what is
called the Glass Ceiling Commission. Founded by Senator Dole and
commenced under the inspiration of his wife, Elizabeth Dole, this
commission has toiled for 4 years, coming up with data on the
numbers and the percentages of minorities and women at the high-
est ranks, highest reaches of corporate America. The preliminary
results I’ve seen are very discouraging.

Mr. FaTTAH. Mr. Secretary, I’m sure once you get through with
that analysis, you won’t find it as diverse as the Olympic team that
the United States fields. The question I have, however, is that as
we looked at all your charts, there are a lot of challenges facing the
American worker. Somehow it’s been suggested recently that af-
firmative action is somehow at the top of this list of challenges. I
didn’t notice it on your charts. You talked about the decline in real
incomes, to what degree is the whole issue one of some significant


10

porate downsizings, we’ve developed an innovation which is a kind
of S.W.A.T. team. That is, we have an interagency, interdepart-
mental effort led by the Department of Labor going in and helping
people quickly get new jobs before they lose the old jobs. And that’s
been enormously effective in many base closing instances and also
major corporate downsizings.

ension and Welfare Benefits Administration case processing
backlog has been reduced dramatically. The Office of Workers’
Compensation programs—has streamlined our claim review proc-
ess. We had a backlog going back 15 years, and we've cleaned up
most of that backlog.

The Pension Benefit Guarantee Corporations Missing Participant
Outreach Program—this is something we rarely think about, but in
fact there are an awful lot of people who have pensions owed them
who don’t know they have pensions owed them by companies. And
we've identified them and restored millions of dollars to people who
didn’t even know that they had paid into pension plans, that they
deserve it and they are now getting it.

Seven Hammer Awards. Now, I don’t know if this committee
knows what a Hammer Award is. The Vice President has been giv-
ing out what he calls Hammer Awards to various agencies and de-
partments for reinvention and innovation. We've got seven of
them—I’m proud to say, the most of any department or agency in
the Federal Government, in terms of the innovations that we have
come up with up to date. And I’m proud of the department; I’m
proud of the staff; I’m proud of the people who continue to make
more with less.

I think that brings to a close my formal remarks, and I would
be happy to answer any questions, Mr. Chairman, the committee
may have.

Mr. SuHays. Thank you again, Mr. Secretary. You’ve given us a
lot of provocative information, and it would be nice to have you
here even longer, but we’re going to get you out by 3. What I’m
suggesting to your staff—if they can turn the charts on end so they
can fit more. Doris, maybe you can help them out. If you have them
in groupings, each one does not have to be separate. But I don’t
need to use a chart right now. Can you hit the 5 minute. Thank

you.

What I'd like to ask you first, in fairly brief terms, is where do
you think you're having the biggest successes right now in the de-
partment, and where are you having your biggest challenges?

Mr. ReEIcH. Mr. Chairman, some of the ‘biggest successes, in
terms of employment and training, have been most recently in es-
tablishing one-stop career centers, as I mentioned before. We have
a competition going among the States—six States have been
awarded grants to set these things up. They’re spreading like wild-

ire.

The States understand that they are working—they’re helping
people not only get unemployment insurance and other benefits
quickly, but they are also identifying people who are unlikely to get
their old jobs back, and they are consolidating a lot of employment
and training and job search assistance in one place.

We're also succeeding, I think, in the school-to-work opportuni-
ties area that is under a new piece of legislation. That, too, has


29

egorical program or another; whether it comes through one commit-
tee jurisdiction or another; whether it comes from one department
or another. If a person walks in off the street, needs some help get-
ting a job, there's a counselor there, there’s good information there.
That person can get what that person needs. And that is street
level consolidation. I think those one-stop centers already take us
a far way in that direction.

Mr. GREEN. Thank you, Mr. Secretary. Thank you, Mr. Chair-
man.

[The prepared statement of Hon. Gene Green follows:]

PREPARED STATEMENT OF Hon. GENE GREEN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TEXAS

Thank you, Mr. Chairman. The next two hearings this committee will hold cover
issues that are very important to me: labor and education. The Administration is
continuing with its reinvention efforts, to consolidate programs and target the most
needy for assistance. I do not think the importance of this mission should be
downplayed or underestimated.

From reorganizing job training programs to encouraging the development of
school-to-work apprenticeships, the Labor Department has been in the forefront of
the movement to get government to respond to current needs. And let us not doubt
there is a need to be filled. I do not believe the federal fovernment is all-powerful
and all-knowing. I do, however, believe that the federal government can serve as
a partner with the States and the private sector to encourage the kinds of programs
that will help workers get job training and increase their lifetime earnings.

T applaud the Secretary's goal of making the the Department’s programs more ac-
countable, encouraging competition among service providers, and giving states flexi-
bility to tailor the programs to local needs. We need to make this goal a reality and
I will gladly work with the Secretary on this matter.

Mr. CHRYSLER [presiding]. Thank you. I have a couple of quick
questions. The budget—you mentioned about the 70 job training
programs that you’re consolidating. What is the budget for those 70
programs, and how many employees to administer those 70 pro-
grams? ; .

Mr. REICH. The total budget for those 70 job training programs,
I will give you in half a second. Congressman, the—we have ap-
proximately $10 billion in these programs, in terms of the Depart-
ment of Labor’s portion of these programs. And that’s a budget of
about $135 million for oversight. And I think that’s a very impor-
tant point because the actual administrative oversight costs now
being undertaken are actually a very, very tiny proportion of those
costs. This gets to the point I was making before—— .

Mr. CHRYSLER. How many employees? I’m real close on my time,
because I’m going to have to go vote.

Mr. REICH. OK. The total number of employees we have for all
of these programs is, let’s see, and I'll give it to you in one half sec-
ond, let me just—OK, we will have to submit that for the record.
Ihave an estimate, but I will have to get it back to you. .

Mr. CHRYSLER. If you could send it to my office, I’d appreciate
it, along with how many jobs we're going to create out of that
group. Second, do you agree or disagree with the President's end
run yesterday on the striker replacement bill of the Congress?

Mr. REICH. Congressman, I disagree with the characterization as
an end run. Under the procurement—— .

Mr. CHRYSLER. We weren't allowed to vote on it. .

Mr. REICH [continuing]. Authority of the United States, and this
has gone back right the Franklin D. Roosevelt, all the way through



98

Mr. SHays. OK. Let me just quickly go through, since you were
here when the Inspector General and GAO spoke, JTPA you have
basically touched on. Let me just ask you to focus on the Jobs
Corps program in general. I would like to know what you thought
about the tax credit program. I would like to know what you think
about the whole issue of—if you have encountered this in your
work—and maybe, Mr. Barnow, maybe you are the only one that
has—the NAB getting funds without competition. Maybe you could
just kind of respond to the testimony you have heard earlier.

Mr. Barnow, do you want to start.

Mr. BaRNow. OK. There have been a number of evaluations of
the Targeted Jobs Tax Credit. I’m not familiar with the work that.
has been done by I believe it was the Inspector General’s Office,
or was it GAO, but most of them find small, if any, benefits, so that.
their findings were not inconsistent with other studies that I have
seen.

Mr. SHays. So the general thrust of their testimony you would
concur with.

Mr. BARNOW. Yes. There is some—there have been some studies
that have found positive impacts but not as large as one would ex-
pect. My review of the literature a few years ago found that, on bal-
ance, it was not one of our best programs.

Mr. Suays. Was there anything they said you would have taken
issue with either to say they understated it or they overstated it
when you were listening?

Mr. BaRNow. Well, I would have to look at the study. I was a
little surprised that they found as many as 92 percent of the people
would have been hired anyway. That sounded a little high.

Mr. Suays. And I wish I had pursued how they determined that.

Mr. Barnow. I haven’t seen the study, but, again, most of the
studies are not very positive on TJTC.

Mr. Snays. An yet we keep funding it.

Mr. BARNOow. Well, it keeps dying and coming back sort of like
a vampire.

Ms. NIGHTINGALE. If I could add one thing?

Mr. Suays. Yes, definitely.

Ms. NIGHTINGALE. I think when you talk to employers out in the
real world, there are some employers that feel that it is an effective
tool for them for hiring, and when you talk to some job developers
in programs, they feel that it is one more tool in their little black
bag of tools that they can use to help get people hired, but overall
the net impacts are not——

Mr. SHays. My recollection is that we had a hearing on this. And
I recall the Marriott Corp. or some others said that they had found
a way to have it be effective for them.

My time has come to a close.

Mr. Towns.

Mr. Towns. Thank you very much, Mr. Chairman.

Let me begin by first thanking both of you for your testimony—
all three—well, actually no testimony yet from Ms. Nightingale.

Mr. SHays. But she is teamed up with——

Mr. Towns. But she sure has given us a lot of thought around
the questions, no question about that.


91

client will decline considerably, allowing the state to use the savings to serve
more individ with the same amount of resources. However, they do not en-
vision a reduction in total costs below the pre-integration level.

In Indiana, where d JTPA programs have been fully merged, customer
satisfaction surveys administered to job seekers and employers indicate an in-
crease of 26% in overall satisfaction, a 10% increase in employer satisfaction,
and a 53% increase in job seeker satisfaction between 1990 and 1992.

Much can be learned about efficiency and cost savings from the experiences of de-
centralization begun during the Reagan administration. During this period, program
implementation and management responsibilities did devolve to the states, who
were willing partners in efforts to contain costs through program restructuring.
However, the evidence of actual administrative savings is meager. There were effi-
ciency gains from combining parallel lines of administration, but in some cases state
regulations were perceived by local agencies as more burdensome than the federal
regulations they replaced.? !n a recent report on block grants, the GAO notes that,
while states reported management efficiencies under the block grants, they also ex-
perienced increased grant management responsibilities. GAO notes that cost
changes could not be quantified due to the absence of uniform state administrative
cost definitions and data, as well as a lack of comprehensive baseline data on prior
categorical programs.3

Savings at the federal (national and regional) levels resulting from consolidation
will be mainly related to personnel and agency operations (i.e., not program costs).
The amount of savings will depend on the number and types of programs combined,
but since expenditures at the federal level are only a small fracticn of program costs
(generally less than 1%), the potential savings are also low. For example, by totally
combining the federal administration of JTPA Title IT and Title III programs, if, say,
one-third of the current combined costs ($26.2 million) might be reduced, that would
translate into about $8.7 million dollars. This potential savings, though, would be
reduced by the costs of any investments required for computerized data systems,
program policies, personnel procedures and other administrative functions.

jar analysis suggests that the potential for administrative savings is likely to be
small relative to total direct program service costs. This does not mean that consoli-
dation of programs should not be seriously considered—in fact, most state program
administrators feel that some amount of consolidation and operational simplification
is critical to improve program effectiveness and efficiency. Savings are expected in
r/customer costs—efficiencies allow more individuals to be served with the exist-
ing level of resources. But, the analysis here does suggest that the potential for ad-
ministrative savings is likely to be very small relative to total direct program costs.

Mr. Snays. Thank you.

Ms. Nightingale, do you intend to have a statement as well.

Ms. NIGHTINGALE. No.

Mr. Suays. So you will be here for questions. Thank you.

Mr. Barnow.

Mr. BaRNow. Thank you. I would like to thank the subcommittee
for providing me the opportunity to testify today.

I will first note a few areas where my interpretations differ from
those of the General Accounting Office and the Office of the Inspec-
tor General. I will then turn to the broader area of agreement with
their findings and discuss the implications of these findings. Fi-
nally, I will discuss how GAO and OIG reports of abuse of only on-
the-job training programs have resulted in underuse of a strategy
that is often one of the most effective we have.

First let me take on some of these findings. Finding No. 1 by
GAO: There are 163 employment and training programs with sub-
stantial overlap among them. That is the chart over there. Basi-
cally, I think it would be scary if there really were 163 programs,

2See Peterson, e E. et al. 1986. The Reagan Block Grants: What Have We Learned?
Washington, DC: The Urban Inatitute Press; and Peterson, George. 1984. “Federalism and the
States: An Experiment in Decentralization,” in Palmer, John and Isabel Sawhill, eds. The
Reagan Hocord. Washington, DC: The Urban Institute Press,

30S. General Accounting Office. February 1995. Block Grants: Characteristics, Experience,
and Lessons Learned.


11

been distributed based on a competitive basis to the States. Edu-
cators, business, labor, community-based organizations have come
together to come up with plans so that work-based learning and
school-based learning is merged. For young people who are not
likely to go on to college, but even for those who may go on to a
4-year college, we have found—the literature, the studies, the re-
search shows—that if you can get to them early—I’d like to get
them even earlier than 10th grade—but if you can get to them by
10th grade and show them the world of work and combine work-
based learning with school-based learning, these people can get
ahead.

That program is going like gangbusters. We’ve had other suc-
cesses, I've mentioned, with reinvention; other successes with get-
ting people, dislocated workers, jobs faster than they have ever got-
ten those jobs before. I’m enthusiastic about what we've done. I’ve
got to say to you, and perhaps I’m anticipating your next question,
that my greatest frustration is that the demand for help getting
across the great divide from the old economy to the new economy
is greater than it has ever been before.

People need help out there. I go around the country and I visit
community colleges—40 percent of the attendees are adults. But
they say to me, we can’t afford the tuition; we can’t afford getting
this kind of skill; we need to get the good information about what
skills are in demand. Again and again I confront average working
Americans and the working poor who are trying so hard to get
across that great divide. I call it a great divide, from the old econ-
omy to the new economy.

What I mean is that the old system of mass production, which
used to provide good $18 to $24 an hour jobs, adjusted for infla-
tion—$18 to $24 in 1994 dollars—that old mass production system
is no longer generating those good middle-class jobs that are the
gateways to the middle class.

Mr. Suays. Is the challenge trying to decide how you reorganize
the department to meet that need? One of the things I appreciate.
even though you divided up your timeline in terms of wealth an
growth, starting 1950 to 1978 and then going from 1979 to 1993,
is that it is a totally changed world environment.

Mr. REICH. It’s a completely changed—and the change, it’s al-
most a homily, Mr. Chairman, to say that the change is accelerat-
ing. But it is, indeed, accelerated. ‘About 2 years ago, if I may just
make one further point.

Mr. Suays. Sure.

Mr. REICH. Two years ago when I started talking about the skill
needs of the country, the President started talking about it, a lot
of people would say to me, well, training for what? There was a lot
of skepticism about there being jobs out there for people who did
not have a 4-year degree. I can tell you now, as we are seeing the
economy pull back from recession, there are huge numbers—mil-
lions upon millions—of jobs requiring some technician type skill.

Automobile technicians—I don’t know if you saw recently the
data—we can’t even supply nearly the number of automobile tech-
nicians the market needs, people who understand the electronics
underneath the hood of a car. They need some training, usually 1
year to 18 months. But also sales technicians, people who can do


97

program consolidation without having a particular consolidation
program in mind.

ir. SHays. Let’s just take a case—I get the sense. So we are tak-
ing the job training.

is. NIGHTINGALE. Right, JTPA.

Mr. SHays. Mr. Barnow, you are making a point, there aren’t 163
programs so in some ways—so maybe there are 120. I mean give
TMme a sense—

Mr. BaRNow. It depends how you count them, right. There are
about 12 to 14 major programs, and, as I indicated, it has been es-
timated by the Department of Labor staff—I did not check—that
about 12 programs account for three-quarters of all the money.

Mr. Suays. That is a very valid point. What I’m trying to get a
handle on is, is it fair to say all 163 are separate budgeted items
with their own bureaucracy?

ea Barnow. I think they have funding streams for most of
them.

Ms. NIGHTINGALE. No.

Mr. Suays. I’m just trying to understand what your funding
streams—yes, Ms. Nightingale.

Ms. NIGHTINGALE. They don’t all have separate bureaucracies.
Some of the funding streams are administered together.

Mr. BARNow. That is correct.

Mr. Suays. Did GAO use a little poetic license? Is this basically
your point?

Ms. NIGHTINGALE. The General Accounting Office is used to look-
ing at budget accounts, and that is what they did.

ir. SHays, OK. So they looked at budget accounts. I’m trying to
understand the significance of what you are trying to tell me.

Ms. NIGHTINGALE. We are looking at programs.

pM, Hays. OK, and, of programs, how many programs, do you
think?

Ms. NIGHTINGALE. We have identified 20 within the Labor De-
partment that provide either job training——

Mr. Suays. Instead of 37.

Ms. NIGHTINGALE. Right. Either job training or employment as-
sistance to individuals.

Mr. Suays. If GAO were here now and if I were to ask them,
would they argue back and say yes, you have 20 general areas of
activity but you really have different people—37 different
decisionmakers in the process? Would they still contend it is very
disjointed? Why do we have it? Let me back up. Why don’t we just
have 20 programs with 20 funding sources then?

Ms. NIGHTINGALE, I think that the point is that, whether it is 20
or 37, there are still a lot of programs there and there is still room
for improvement and probably for consolidation.

Mr. SHAyYS. Fair enough.

Now your general theme though is, you are not going to receive
the kinds of savings financially Sut ou are goin to end up with
a better program, more efficient, and so on. So if you are looking
to find ways to balance the budget, don’t look here in consolidation
to balance the budget, but you will end up providing a better serv-
ice. Is that your general thrust?

Ms. NIGHTINGALE. Yes.


102

Mr. SCARBOROUGH. Do you have any comments as far as your
confidence in the Federal Government's record in the past?

Ms. Pinbus. I don’t think the tenor of any of the discussions I
heard was that the Federal Government should do everything and
not allow the States to have any responsibility here. In fact, most
of our study was based on looking at what the States are already
doing and what their experiences have been to date in integrating
programs. I just think it is again the concern, based on the block
grant experience, that there needs to be accountability when some
of those responsibilities are turned over to the States.

Mr. SCARBOROUGH. Let’s talk about when responsibilities are
turned over to the States, and I would like to ask each of your
opinions regarding something that Alice Rivlin wrote a few years
back before she came to the administration, and the basic thrust
of her work at the Brookings Institute in 1992 had to do with a
book where she stated that job training and education and employ-
ment type work would be better handled at the State government
and that the Federal Government should rapidly go into retreat in
these areas.

Would you agree or disagree with Ms. Rivlin’s assessment? And
let’s take it beyond what is possible in 1995, because obviously we
can’t turn the switch off in 6 months and get the Federal Govern-
ment to retreat the way Ms. Rivlin stated she would like them to
retreat. But would you all agree that that is a desirable goal, to
move in the direction that Ms. Rivlin wrote about, and that is
trusting the States with the important function of job training?

Ms. NIGHTINGALE. I have not read what you are talking about,
but I think there is a difference in terms of whether Federal money
is involved or removing the Federal investment in that area and
depending on States to do it, and I think those are two different
issues.

Mr. ScaRBOROUGH. OK. Why don’t we focus then on the Federal
Government getting out of funding and freeing up the tax revenue
to allow the States to raise money for job training, and let’s take
it from that perspective. Is that a desired goal as far as you all are
concerned?

Ms. NIGHTINGALE. It raises a lot of concerns in my head, because
T’'m not sure that every State would in fact pick up and fill the gap
where the Federal Government withdraws, and the burden of that
will fall on those who are least able to gain access to the economic
and education system. So I would be concerned about the equitable
treatment across the country.

Mr. BARNOw. I would echo that concern. I have not read Dr.
Rivlin’s book so I would have to read that before I could fully un-
derstand it, but I think today we do have a number of programs
that are run by States as well as some that are run by the Federal
Government, and it is hard to say whether the State training pro-
grams are necessarily more effective or not. I certainly wouldn’t
rule it out, but at this point I just don’t have enough information
to say whether it makes sense to proceed to scrap the Federal sys-
tem that she has apparently recommended.

Mr. SCARBOROUGH. OK. All right. Thank you. I appreciate it.

Mr, Suays, I just have one other question to ask, and then I
would open it up for my colleagues to just go one round. I’m not


65

FIGURE 1: LEGISLATIVE CHRONOLOGY OF KEY WORKPLACE PROTECTION STATUTES

ADEA: Age Discrimination in Employment Act
ADA: Americans With Dis: ities Act
COBRA: Consolidated Omnibus Budget Reconciliation Act of 1985
CWHSSA: Contract Work Hours and Safety Standards Act
DBA: Davis-Bacon Act
Bet Dette an
‘mplo; tection Act
Employee Retirement Income Securit

EQPA: Equal ay Act (amendments to the Peis ea Labor Standards Act)

EO 11246: Executive Order 11246

FLSA: Fair Labor Standards Act

FMLA: Family and Medical Leave Act

IRCA: Immigration Reform and Control Act (amendments to the Immigration and
Nationality Act)

LMRDA: Labor-Management Reporting and Disclosure Act

MSHA: Federal Mine Safety and Health Act

MSPA: Migrant and Seasonal Agricultural Worker Protection Act

NLRA: National Labor Relations Act

OSHA: Occupational Safety and Health Act

RLA: Railway Labor Act

RA: Rehabilitation Act—Section 503

SCA: Service Contract Act

STAA: Surface Transportation Assistance Act (Anti-retaliatory provision)

Title VII: Title VH of the Civil Rights Act

: Unemployment compensation provisions of the Social Security Act
VRB Veterans’ reemployment rights provisions of the Selective Training and

rvice Act
Seria: Walsh-Heale:
WARN: Workers Adjustn justment and Retraining Notification Act



71

Appendix I—DESCRIPTION OF MAJOR STATUTES AND EXECUTIVE ORDERS GOVERNING WORKPLACE.

REGULATION—Continued

‘Statute Description!
Section 503 of the Rehabilitation Prohibits federal contractors and subcontractors from discriminat- Labor -
Act. ing in employment on the basis of disability and requires them oFcce
to take affirmative action to employ, and advance in employ-
met, individuals with disabilities,

Anti-retaliatoy provision - STAA .. Prohibits the discharge or other discriminatory action against an Labor ~
employee for filing a complaint relating to a violation of & OSHA®
commercial motor vehicle safety rule or regulation or for refus-
ing to operate a vehicle that is in violation of such a ruie or
regulation, or because of a fear of serious injury due to an un-
safe condition,

Occupational Health and Safety:

OSHA... ’ Requires employers to furnish each employee with work and @ Labor -
workplace free from recognized hazards that can cause death ‘OSHA
( serious physical harm.

MSHA .... Requires mine operators to comply with health and safety stand- Labor -
ards and requirements established to protect miners MSHA®

Drug Free Workplace Act uuu» Requires recipients of federal grants and contracts to take certain Labor ~
steps to maintain a drug free workplace. ‘oFcce

Protects certain rights of workers, including the right to organize NLRB
‘ond bargein collectively through representation of their own
choice,

Requires the reporting and disclosure of certain financial and ad- Labor -
ministrative practices of labor organizations and employers: es- ‘aw?
tablishes certain rights for members of labor organizations; i
poses other requirements on labor organizations.

Railway Labor Act ..... Sets out the rights and responsibilities of management and work- MB}
‘ers in the rail and sirine industries. and provides for negotia-
tion and mediation procedures to settle labor-management dis-
putes,

Employment Decisions: Hiring and Sep-
arations

Polygraph Protection Act Prohibits the use of lie detectors for pre-employment screening or Labor -
during the course of employment. WHO

Veterans’ Reemployment Rights Provides reemployment rights for people returning from active duty Labor -
or reserve training in the armed forces or National Guard. vers

Employment provisions of IRCA... Prohibits the hiring of illegal aliens and imposes certain duties on Labor -
employers in iting: prohibits employment discrimination we
against legal aliens; authorizes but limits the use of imported
‘temporary agricultural workers.

Requires employers to provide advance written notice of plant None!
closings and mass layoffs to individual affected emplayees,
local governments, and ther perties.

‘Many statutes are complet and contain a at vents, rights, and Th ‘has been simpliied

or istrative purposes,
‘wage and Hour Dision
Pension Welfare Benetit Administration
“Pension Banelt Guarantee Corporation
Statormal Revenue Sarvice
Employment and Training Administration

12 Office of the American Workplace
National Mediation Board
eteran's Employment ond Training Service

‘Although EIA wrote WARN's implamenting regulations, there i se principal eeforcement agency because the law is enforced privately

‘through the courts


16

Mr. REICH. Yes, and that’s why we've sought additional re-
sources.

Mr. Davis. OK, thank you.

Mr. SHays. Mr. Towns, you have a very generous 5 minutes com-
ing to you.

Mr. Towns. Thank you very much, Mr. Chairman. Mr. Secretary,
let me also say that we appreciate the good work that you've done.
And as I pointed out in my opening statement, there’s probably
some difficult days ahead. As we look at welfare reform legislation
and all the legislation that’s been forth, even talked about, we’ve
talked about a nationwide work mandate, and, of course, I agree
that work is extremely important to any kind of reform.

Does this legislation offer enough support for training and edu-
cation services designed to move people from welfare into work?

Mr. REICH. Congressman, if you’re talking about the legislation
just recently submitted, I don’t believe so, no. It is going to cost
money to move people from welfare to work, in terms of job train-
ing, job search assistance, child care. Of the approximately 5 mil-
lion adults on welfare—that is, you have a population on welfare,
total population, somewhere in the range of 15 million—of the over
5 million adults, approximately 70 percent do get work now within
2 years, contrary to the popular mythology. But most of them then
fall back onto welfare in the future.

You see, we're dealing with a whole stratum of society, of the
work force, that is falling onto welfare, or if they get out, they fall
back onto welfare. These are the very low, marginal working poor.
They need help with job search assistance and job training and
child care. They cannot simply be assumed to get off welfare and
be on the street.

I don’t want to overstate this, and I don’t think I’m overstating
it when I say that we want a welfare-to-work program, not a wel-
fare-to-the-street program.

Mr. Towns. You know, I’m looking at this whole reform, and I
think if there’s one budget in town that should be left intact, if not
increased, it’s your budget.

Mr. REICH. Well, I would agree with you, Congressman. [Laugh-
ter.

Mr. Towns. I’m telling you, I think that that point has to be
made, because if you're serious about really putting people back to
work, I think that job training—I looked at the charts—is very,
very important. And 1 think that that’s an area where we need a
lot of help, and your agency would be the agency to provide that
kind of leadership.

Mr. REICH. The most important social program we can come up
with as a society is a job, and better than a job a good job.

Mr. Towns. Many of the States’ job services still face significant
TJTC processing backlogs for 1994. Has the Department of Labor
taken a position as to whether employers who hire TJTC eligible
workers through December 1994 are entitled to have those workers
processed by the local job service?

Mr. REICH. They could be processed, Congressman, the problem
is that the funding literally runs out in December unless the TJTC,
like other tax benefits, are extended beyond January. And there-


99

Let me just sort of begin by raising the question, I think you in-
dicated that—well, let me back up and just talk about, the IG testi-
fied earlier that the effectiveness of the JTPA program he said
could not be evaluated. Do you agree with that testimony?

Mr. BARNOW. No. He said that in conjunction with his state-
ments about the performance standards and—I think I have some-
what of a different view of how you would do performance stand-
ards versus an impact evaluation, and I think the two activities
can be separated although they should be linked.

Basically , the Department of Labor has conducted an evaluation
of JTPA. It wasn’t without its problems of course, but it was done,
and it was done with random assignment of people to control sta-
tus and experimental status, and it did in fact obtain long-term es-
timates of the impact of the program for the Nation as a whole,
and they are continuing to follow people up to get even longer-term
impact.

So I’m not quite sure. I didn’t have a chance to ask him what
he meant by that exactly.

Mr. Towns. OK.

I have so much to ask in terms of this timeframe, so I’m jumpin,
around a bit here. I think it was in February there was a proposa
to merge DOL and the Department of—Education and Equal Em-
ployment, Opportunity Commission into a single Department, and
of course—of Education and Employment. Do you agree with the
proposal? And let me just ask you, what message does that send?
I think that is really what I want to ask.

Ms. NIGHTINGALE. I think it is an important issue to look at be-
cause the message that it would send is that we are moving toward
a national policy on work force development and the preparation of
workers and also lifelong learning, and right now GAO is correct
that the programs are scattered around in different agencies, some-
times for very good reasons, because of the target group that they
are responsible for, and there is room for consolidating, and there
is room for not necessarily sticking to the historic alignment of pro-
grams in different agencies, and we have to, as a Nation, decide
what—whether the policies are on work force preparation and if,
in fact, that is the case, what the appropriate administrative struc-
ture is for doing that, and consolidating the programs is one way
to achieve that.

Mr. Towns. Yes. Do you want to add something, Mr. Barnow?

Mr. BaRNow. I think it is a very complex issue, and in one sense
it sends signals to different groups whether you have a separate
Cabinet agency for labor and education, and that is one part of why
people Propose either keeping them separate or consolidating them.

It is definitely important for us to look, as people have testified
today, at the programs that are very similar like vocational edu-
cation and like the JTPA. Those programs have very similar mis-
sions, and whether they are housed in the same Cabinet agency or
not, I think there is definitely a need for Congress to think about
whether they have distinct missions, whether we need to have sep-
arate programs.

Then when you get into these other areas, of course, they are
quite distinct. EEOC is an enforcement agency. I guess its mission
is in some ways similar to that of OFCCP, the Office of Federal


21

sweatshop conditions and third-world working conditions like we
haven’t seen since the turn of the century. It is getting worse and
worse.

Mr. Suays. Mr. Secretary, I’m sorry to interrupt you. I was hop-
ing to have a colleague come back to replace me, but we have about,
4 minutes until the clock runs out on our vote. Mr. Chrysler and
Mr. Martini have left. They'll come back; as soon as they’re back,
whichever one is here can start. Mr. Fattah will also ask his round
of questions, so just be at ease for a recess for a short period.

Mr. REICH. OK

[Recess.]

Mr. MartTINI [presiding]. I’m back. I’m out of breath, but I’m
back. Thank you, Mr. Secretary, and thank you for being here this
afternoon.

I didn’t hear the earliest part of your testimony, and I hope I’m
not, therefore, at a disadvantage, but in just reviewing some of the
materials in anticipation for today’s hearing, and in listening to
your testimony, you’ve repeatedly talked about consolidating some
of these programs; and the one chart in particular where 70 pro-

‘ams are, I assume, going into four areas to be—from that point,

guess they'll be maintained in four programs, is that correct, Mr.
Secretary?

Mr. REICH. Yes.

Mr. Martini. And in listening to other things in your testimony
about streamlining and reinventing government, I therefore find
what may be a contradiction. But the fiscal year budget seems to
go up from 1995 to 1996. And then, even though you've shown a
reduction in employees, I think, from 1993 to 1994, yet the fiscal
year request for 1996 is an increase of employees. Could you first
just——

Mr. REICH. Well, first of all, the numbers, the increase in our re-
quest has to do substantially with the G.I.—what we're calling the
new G.I. bill. That is, making sure that there is even the barest
adequate amount of money to provide the job search assistance, the
job counseling and the job training for people who are losing their
jobs and also for people who are low-wage.

As I started to say to the chairman, just before people had to
leave, there is right now a very relatively small percentage of the
work force getting the kind of assistance that they need in order
to be more productive, in order to get quickly new jobs. The country
benefits in terms of the taxpaying and more productive citizen, and
we can more quickly get them new jobs. And so the President has
chosen to take money out of elsewhere in his 1996 proposed budget
which does reduce the budget. He overall continues on a course to-
ward budget-deficit reduction, but he wants to take the money from
elsewhere and maintain, enhance actually the amount of resources
available for that sort of job training in the G.I. bill, for dislocated
workers and also for low-wage workers.

Your second question, having to do with FTEs, the major in-
crease in FTEs has to do with immigration, the problem of undocu-
mented immigration. And the President is proposing that we in-
crease the number of inspectors in the Wage and Hour Division.
What we have found, after a lot of our investigations, is that some
employers in major cities in the United States are willing to risk


50

in which the IG found that 92 percent of those hired would have
been employed regardless of the program.

So I just welcome our witnesses, and ] know we will get into
some other areas as well and now would just ask for unanimous
consent that all witnesses’ statements be included in the record, so
that you don’t have to read your testimony, that you can highlight
parts; that Members’ statements can be included in the record as
well; that we have 3 days to include all our information into the
record; and I also—without objection, that will happen, and I'l] just
call on our distinguished Member, Mr. Towns, the ranking member
of the committee.

[The prepared statement of Hon. Christopher Shays follows:]

PREPARED STATEMENT OF HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN.
CONGRESS FROM THE STATE OF CONNECTICUT

Welcome to all our witnesses. The porpose of today’s oversight hearing is to exam-
ine opportunities for cost savings within the Department of Labor, with an emphasis
on waste, fraud, abuse and mismanagement. We will also discuss possible cost re-
duction through the consolidation or elimination of a multitude of employment
trai programs.

This is the second oversight hearing on DoL. In the first hearing held March 9,
our witness was the Secretary of Labor, Robert Reich. His testimony included dis-
cussion of Dol,’s mission and his plans for streamlining the department.

To help the Subcommittee achieve the purpose of today’s Trearin , experts from
both public and private organizations will testify. They include: DoL’s Office of the
Inspector General; General Accounting Office; Urban Institute; and the Institute for
Policy Studies at Johns Hopkins University. We appreciate the time, interest and
recommendations of each witness.

We anticipate hearing testimony about the Job Training Partnership Act (JTPA).
According to DolL's OIG, the JTPA program is vulnerable to fraud and lacks ac-
countability. The iG auditors continue to find over-billing, falsification of exam
scores and other abuses in the program.

As for accountability, a 1993 IG audit of the JTPA Title II-A program found that
of the participants who left the program, only 53% obtained ‘obs of which almost
half were paid $5 an hour or less) 14% achieved some “employability. enhance-
ments,” and 33% received no “employability enhancements” or obtained a job.

Another issue to be discussed is the Targeted Jobs Tax Credit (TJTC) program
which offers tax incentives to corporations for hiring the disadvantaged. A nation-
wide audit of the program by the IG found that 92% of those hired would have been
employed regardless of the tax credit and in most cases employers sought to deter-
mine eligibility after they had decided to hire the employee. The tax credit, the IG
report states, is a windfall for employers and does not induce hiring of the disadvan-

taged.

Taws regulating the workplace also need to be examined. The GAO states that
there are 40 different laws and a multitude of Dol. offices establishing regulations
for the workplace. The GAO interviewed businesses and employees and found that
the system is inefficient, complicated and difficult to understand.

We will also discuss the awarding of noncompetitive, discretionary grants. A 1994
GAO report states that DoL awarded 134 such grants of $25,000 or more to organi-
zations other than state or local governments during the FY90-92 period. Many of
those organizations have been receiving the same awards for more than 25 years,
GAO notes that the noncompetitive grants often have high administrative costs and
there is limited oversight on how the money is spent.

These are a few of the issues the Subcommittee wil] discuss today. We look for-
ward to the testimony of our panelists.

Mr. Towns. Thank you very much, Mr. Chairman. Let me thank
you for calling this hearing and also say that I really appreciate
the fact that you have paid a lot of attention to these matters.

It should be a given though that the purpose of the agency is to
foster, promote, and develop the welfare of the wage earner of the
United States, to improve their working conditions, and to advance
their opportunity for profitable employment. That is not my lan-



95

mony before the Senate Labor and Human Resources Committee on January 10,
1995. Most agencies may not collect data on participants and outcomes, but the
JTPA Title 11 programs gather a great deal of information about participants, and
@ major evaluation has recently been conducted. Mr. Crawford cites findings from
the JTPA evaluation, but he only cites the impact for youth, for whom the program

ars ineffective. He omits the findings for adult men and women, for whom

"A has a statistically significant positive impact of about $900 annually (in 1993
dollars).2 My concern is that the Congress may misinterpret Mr. Crawford's remarks
to apply more generally than is warranted.

Finding #3: Overlapping employment and training programs can add unnecessary
administrative costs.

These findings are presented in a 1994 GAO report to the Senate Committee on
Appropriations.® While the potential for administrative cost savings is real for over-
lapping programs, the report only speculates about auch savings and presents no
real evidence. Ms, Nancy Pindus and Ms. Demetra Nightingale of the Urban Insti.
tute will be testifying today about their investigation into this issue.

IMPEDIMENTS TO PROGRAMS IDENTIFIED BY THE GENERAL ACCOUNTING OFFICE AND
THE OFFICE OF THE INSPECTOR GENERAL

I would like to stress that most of the concerns raised by GAO and OIG represent
real impediments to operating efficient employment and training programs. In broad
terms, there are two types of impediments to operating efficient programs: (1) bar-
riers that keep programs from working well together, and (2) barriers that keep eli-
gible individuals from actively participating.

Frequently participants will benefit by receiving services from more than one pro-
gram; in fact the 1992 amendments to JTPA require programs to refer applicants
and participants to other programs that may assist them. Unfortunately, there are
a number of barriers that make it difficult for employment and training programs
to work together in serving clients. In some instances, these barriers arise because
of decisions made by cabinet departments (e.g. the Departments of Labor and
Health and Human Services defining low reading skills for participants at different
grade level equivalents). In other cases, states or local government are to blame
{e.g., establishing different geographic boundaries for JTPA, post-secondary voca-
tional education, local k-12 schools, economic development, and other workforce de-
velopment activities). In many cases, however, the Congress is the culprit, often be-
cause p 3 are established by different committees. For example, although the
rationale ‘ind establishing a program year for JTPA beginning on July 1 makes
perfect sense for JTPA, it causes difficulties when working with the JOBS program
or vocational education which use a fiscal year beginning October 1; when one pro-
gram is planning its activities and enrollments for the following year, the other pro-
gram wil be six months away from such efforts.

These barriers have been well documented in the literature. A study of coordina-
tion between JTPA programs and other human service programs conducted between
1988 and 1991 identified a number of programmatic barriers to coordination. The
JTPA Advisory Committee to the Secretary of Labor identified virtually the iden-
tical list of barriers in its 1989 final report.> Most of the barriers identified in these
earlier reports remained a problem in 1994 when GAO issued its report titled Mul-
tiple Employment Training Programs: Conflicting Requirements Hamper Delivery of
Services. Areas of concern include different definitions of qualifying job loss for dis-
located worker programs, different age requirements for various youth programs
youth and older worker programs, different definitions and restrictions on income
for determining eligibility across programs, and different performance measurement
systems in a variety of programs. Although there may be justification for maintain-
ing some differences across programs, Congress and the Administration should
closely examine these differences and eliminate such barriers wherever possible.

2 Office of the Chief Economist, U.S. Department of Labor. What's Working (and what’s not):
‘A Summary of Research on the Economic Impacts of Employment and Training Programs, U.S.
Department of Labor, January 1995. |

4U.S, General Accounting Office, Multiple Employment Training Programs: Overlapping Pro-
grams Can Add Unnecessary Administrative Costs, January 1994.

4See John Trutko, Lawrence Bailis, Burt Barnow and Stephen French. An Assesment of the
JTPA Role in State and Local Coordination Activities, U.S. Department of Labor, 1991

®The Job Training Partnership Act Advieory Committee to the Secretary of Labor, Working
Capital: Coordinated Human Investment Directions for the 90's, U.S. Department ‘of Labor,
1989.



33

OIL, CHEMICAL AND ATOMIC WORKERS INTERNATIONAL UNION

The grantee will conduct training to improve understanding and application of the
process safety management standard by members and their employers. It is develop-
Ing curriculum, and will train existing worker-trainers to train in process safety
management, conduct training, and publish a process safety management training
wo! .

UNITED BROTHERHOOD OF CARPENTERS HEALTH AND SAFETY FUND OF
NORTH AMERICA

The grantee is expanding the delivery of an existing ergonomic program for ap-
prentices by training United Brotherhood of Carpenters COBC) apprenticeship in-
structors and business agents to deliver the program. These individuals will conduct
training for apprentices and journeymen, The program will develop toolbox talks on
ergonomics and provide these to supervisors, The toolbox talks will be available in
both English and Spanish. The program will be incorporated into UBC's regular ap-
prenticeship training.
LABORERS-AGC EDUCATION AND TRAINING FUND

The Laborers-AGC, with technical assistance from the National Constructors’ As-
sociation and the Laborers’ Health and Safety Fund of North America, is developi
a core process safety management course specifically for contract employees. Affili-
ated training fund instructor staff will be trained as trainers and will provide proc-
eas safety management training to workers engaged in construction at Rrclities cov.
ered by the process safety management standard.

MASSACHUSETTS COALITION FOR OCCUPATIONAL SAFETY AND HEALTH
(MassCOSH)

MassCOSH, in conjunction with other COSH groups in New England, is providing
training in ergonomics to clerical, construction, health care and industrial workers.
Ergonomics specialists are assisting in developing training curriculums and mate-
Hale, There are three types of training: training worker trainers, site-apecifi train-
ing, and general training. The latter two are offered in both English and Spanish.
Union locals recruit trainees and provide training sites.

OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION TARGETED TRAINING PROGRAM GRANTS:

FV 1994
Grantees Stan Date i Niel Got
Imard Let ie a

Logging

Lumberjack Resources oso $220,000 t)
Construction

‘Chicagoland Construction 090/94 100831 )

09/30/94 150,000 i)

National Safety Council
Alice Hamitto

09/0/94 185,600 $17,078
0

09/3094 = 150,000 0

09/3094 = 142,870 11,430
09/30/94 = 149,904 M174
098094 150,000 Mar

Ergonomics:
‘Mass Coalition .. 130,795, 0
Other 280,000 68,352
Total. 2 $1,710,000 $122,505

‘Authority: Section 21(c) ol the OSHA Act 1970 (29 USCC 670)

Mr. SHays [presiding]. You have about how many minutes left?

Mr. CHRYSLER. Two and a half.

Mr. SHays. Two and a half, and then they keep it open for two.
Now, that’s a compliment to you, Mr. Secretary, that this gen-


17

fore, although they may be technically certified, there will not be
money. There simply will not be money behind them.

I am of the view that the Targeted Jobs Tax Credit, as currently
designed, is not working. The Inspector General has repeatedly
found—the Inspector General of the Labor Department has repeat-
edly found that as it is currently designed, most of the employers
who hire Targeted Jobs Tax Credit recipients, that is, people who
are eligible for the Targeted Jobs Tax Credit, would have hired
those people in any event.

I am eager to work with Congress in refashioning a Targeted
Jobs Tax Credit that would, in fact, help people get jobs and stay
in jobs and get the training they need. And we have some ideas for
how that could be accomplished.

Mr. Towns. Right. Well, let me say this, I’m concerned that
many of the employers who follow the rules, play by the game and
do what they were supposed to do—they will not get the credits
they’re entitled to. Many States indicate they will cease processing
all requests shortly. So does DOL intend to instruct State job serv-
ices that employers are entitled to have all TJTC hires through De-
cember 1994 processed? I mean, how do you plan to handle this?

Mr. REICH. Well, again, Congressman, it seems to me that if
there is not going to be money there from the Federal treasury,
that is going to be authorized and outlays that are going to be obi

rated beyond December, then although it may be permissible for

tates to go through the technical exercise, I think you're abso-
lutely right—it would be somewhat misleading to employers to
think that they are getting a TJTC eligible person when, in fact,
there is no money behind that. And frankly, we haven’t made a de-
cision yet pending final decision by Congress.

But in the past, the TJTC has been renewed, and renewed retro-
actively, when the TJTC has run out. And as I said, until we get
what looks like a final decision from Congress, it is very difficult
what to do in terms of informing the States.

Mr. Towns. Right. Let me just raise this one question, and it
might have been answered, but I was sort of like leaving and I did
not hear the entire answer. And I asked my staff and, of course,
she said, I don’t think it was answered. So I’m going to have to rely
on staff in this instance, as to whether it was answered or not.

Chairman Shays raised the question regarding Gunderson’s pro-

osal, that you were not provided an opportunity to answer fully
for me as I was leaving. Does this proposal make sense to you?

Mr. REICH. If you’re referring to the proposal to consolidate Edu-
cation and Labor Departments, it does not make sense to me for
a couple of reasons. First, the role of the Education and the role
of primary and secondary education in this society has a great deal
to do with citizenship. It has to do with a variety of education goals
having little to do with narrow occupational skills. In fact, we have
tried very hard in this country not to mix the two up.

Obviously, people who are well-educated and have a good pri-
mary and secondary school education do have a head start and
have a foundation on which to build. But there are so many other
purposes to primary and secondary school education. We have in
our culture and our society a tradition of free public schools, pri-


61

prevent fraud, both from claimants and providers. We also believe agencies need to
ensure that able employees are resumed to work as soon as possible, Including mak-
ing arrangements for part-time or light duty employment.

. Chairman, this concludes my prepared statement. Mr. Fisch and I would be
pleased to answer any questions you or the other Subcommittee members may have.

Mr. SHays. I thank the gentleman. We will wait for questions
and hear from Mr. Crawford,

Mr. CRAWFORD. Good morning, Mr. Chairman and members of
the subcommittee. We are pleased to be here today to discuss ways
to make labor a less costly, more effective agency.

Over the years the Labor Department has contributed much to
the quality of life of American workers. However, the ever increas-
ing rate of change in the economy has presented new demands and
challenges in the way the Federal Government carries out its work-
er protection and work force development responsibilities, leading
many to ask three questions about the Federal role, and I think it
also addresses some of the concerns that you and Mr. Towns had
mentioned, and these three questions are: at should the Federal
role be in ensuring worker protection and work force development?
How can the role carried out in a less costly manner and at the
same time enhance U.S. competitiveness? And, No. 3: What should
be the Labor Department’s role in this process?

Turning your attention to our big board, the workplace regula-
tion board, there are 26 statutes and Executive orders that cover
workplace regulation. The ones that labor has responsibility are in
black, and EEOC has the next highest number, four, which are in
the blue color. The interesting thing to note here—and we will
come back to it——

Mr. Says. Could the gentleman just tell me—I’m not color-
blind—you said blue?

Mr. CrRAwrorD. Blue or violet or whatever.

Mr. SHays. OK.

Mr. CRAWFoRD. I’m not very good at—I know that it is different
than black.

Mr. Suays. OK. Well, we will struggle with this.

Mr. CrAwForp. OK.

Just as in the multiple employment training area where we iden-
tified a number of different players involved in the issue, when you
look at the average employer in this country, they are covered by
about nine statutes and there are eight agencies that they have to
deal with in the workplace regulation issue. If you look at an orga-
nization like OS it has about 1,000 enforcement employees and
in the neighborhood of 100 field locations to carry out this respon-
sibility.

Based on our study in 1994, employers and workers told us that
they fenerally supported workplace regulation and they thought
that there were benefits to having these regulations but they had
concerns about the way the regulations were carried out. They be-
lieve that the agencies employed a “Gotcha” mentality, that en-
forcement was unfair and inconsistent, they didn’t fee] that they
received sufficient credit for good faith efforts, and communications
were poor. They suggest some new approaches that the Labor De-
partment may want to consider, and with these approaches they
tend to be less labor intensive, which could translate into less cost.
The adoption of greater service orientation and greater reliance on


4

Mr. LaNTos. Well, I just want to join you, Mr. Chairman, in wel-
coming our most distinguished witness. Secretary Reich has
brought to this administration a degree of intellectual prowess
which is awe-inspiring, and has done his job with exemplary dis-
tinction.

Mr. Suays. I thank the gentleman, and I'd like to ask the staff
if they would try to anticipate when we’re going to have votes. I’m

oing to suggest to some Members that we leave before the signal.

d I’m happy to give the gavel to either side of the aisle so that
we can proceed without interruption when testimony is given.

Mr. Towns. That means the Democrats might even have a
chance to hold it?

Mr. SHaAys. We're checking it out. [Laughter.]

Mr. Secretary, I’d love to hear your statement.

STATEMENT OF ROBERT REICH, SECRETARY OF LABOR

Mr. REICH. Mr. Chairman, in the interest of time, with your per-
mission, I will submit_my formal statement for the record. Mr.
Chairman, members of the committee, I applaud your efforts to
look at how the government works and how to make it work better.

I want to assure you that we have been actively engaged for the
last 2 years in making the Department of Labor wor! etter and
more efficiently for American workers. And we have to do that, be-
cause even given the resources we have right now, we are able to
deal with only a small fraction of the problem that American work-
ers are facing.

And if you bear with me, I thought it might be helpful for you
if I went through a couple of very quick charts to kind of graph for
you what we are up against. And, Michael Little, if you could just
remove the first chart, please.

Mr. Suays. Mr. Secretary, I’m going to point out that we have
no one else speaking today, and we don’t want you to feel rushed
in your testimony. So feel free to share with us whatever you'd like.

Mr. REICH. Ok thank you. This chart is a chart that shows, as
graphically as I know how to show, what happened to American in-
comes between 1950 and 1978. I call this “growing together,” be-
cause you can see for every quintile, the bottom 20 percent, the
next 20 percent in terms of wages, the middle 20 percent of Ameri-
cans in terms of wages, and even up to the top 20 percent, between
1950 and 1978, everybody’s income at least doubled,

The people at the top went up just about double. Look at the peo-
ple at the bottom, that yellow graph—the bottom 20 percent actu-
ally saw their incomes increase almost 140 percent. This is in infla-
tion-adjusted terms. We're talking about real increases, real stand-
ard of living.

But, Mr. Chairman, members of the committee, I would like to
take a look by contrast—and, Michael, perhaps you could put that
chart right below the next chart you’re going to show—look what
has happened to American incomes between 1979 and 1993. Mr.
Little, perhaps we could put the other chart just below this chart
so we can see the contrast. The bottom 20 percent actually saw
their incomes decline. I’m talking about inflation-adjusted incomes.
This particular chart is in 1993 dollars. Their incomes declined by
17 percent, that yellow line.


93

cases States or local governments are to blame. An example here
would be the different geographic boundaries for programs such as
JTPA, vocational education, K-12, et cetera.

In many cases, however, the Congress is the culprit often be-
cause the programs are established by different committees, and I
would urge you to look into this. One example here is the difference
in the program year concept used by JTPA which starts on July 1
each year and the fiscal year which starts October 1 and is used
for the JOBS program and the voc-ed program.

In addition, as GAO points out in their studies and as we have
pointed out in our previous work, the programs have different defi-
nitions for age for both youth programs and older worker programs,
different concepts of job loss for dislocated worker programs, and
different definitions for income. These are all serious barriers for
the programs to work together.

Turning now to the individual level, I think that it is impor-
tant—it has long been recognized as important for us to provide as
seamless as possible a system for participants. A survey of the 50
States conducted in 1993 by the Urban Institute found that all but
three States have implemented at least some form of one-stop shop-
ping, and as part of its new middle class bill of rights initiative the
Department of Labor has proposed establishing one-stop career
centers. I have not seen the details of this initiative, but if it offers
significant State and local flexibility and if the demonstrations
work out I think it could be a step in the right direction.

In an important sense the 1992 amendments to JTPA may have
used the wrong strategy to deal with problems uncovered by GAO
and the OIGT. The amendments are very prescriptive about how
local programs are to serve participants. Instead, Congress might
consider giving State and local programs more flexibility but hold-
ing them more accountable for the outcomes, and I think this reit-
erates a point made by Mr. Crawford. The discussion of on-the-job
training that I will turn to next provides an example of how the
current. fystem may be too focused on process rather than outcome.

I would like to conclude my testimony by briefly discussing the
use of on-the-job training as an activity in ITPA. OJT has been one
of the success stories in the employment and training field. The re-
cent evaluation of JTPA found that for adults the impact on earn-
ings for those assigned to JTPA was always statistically significant
and of greater magnitude than the impact of any of the other ac-
tivities, including classroom training. However, field studies by
GAO and the Office of the Inspector General identified some
abuses of OJT. In particular, in some instances OJT was used as
a wage subsidy for low-skilled jobs where little, if any, training oc-
curred, people being trained, for example, for 3 months to be dish-
washers. My daughter might qualify for that.

Acting on the GAO and OIG Seports, Congress added a number
of additional requirements for OJT contracts which have resulted
in the curtailment of OJT—I’m sorry—in the curtailment of OJT
for adults and the virtual elimination of this activity for youth.
Since the JTPA evaluation clearly indicates that OJT is one of the
most. Promising strategies for adults, Congress and the Department
of Labor should consider steps to encourage increased use of OJT
while still avoiding the abuse that sometimes occurs.


38

omy. We have entered an era in which, increasingly, skilled and well-educated
workers are the ones who can expect to capture a growing portion of the economic
gains. New technologies and global competition have rewritten the rules that govern
our economic futures. Now more than ever, what you earn will depend on what you
learn. For those with the right education and skills, this new economy means rising
wages and widening prospects. But the wages of the rest of the workforce are atag-
nating or sinking, and their opportunities are shrinking.

The operations and programs of the Department of Labor must be scrutinized in
the light of the central challenge our country now faces: to restore America’s middle
class. If we are to restore our heritage of shared prosperity, American workers need
protection in the workplace and every bit of assistance we can give them in adapting
to the new economy. And let me assure you that I agree with those of you who also
say that Americans are rightly demanding that we provide for these needs as effi-
ciently and creatively as possible.

But only some Americans stand ready to prosper in this new economy. These divi-
sions aren’t simply a threat to the incomes of working Americans; they also under-
mine our nation’s economic competitiveness. Companies are discovering that their
global competitors can replicate nearly every element of their operation, including
machinery, technology, and state of the art processes. The only thing that can’t be
duplicated are American workers—their skills, abilities, and capacity to work to-
gether. For corporations and for nations, a skilled workforce is the only enduring
competitive advantage.

Reaping the dividends

Our investment in America’s workforce over the past two years is already paying
dividends. We are experiencing an unprecedented economic recovery which has cre-
ated 5.7 million new jobs, the vast majority in the private sector. At the same time,
the deficit has been reduced from $290 billion in 1992 to $203 billion _in 1994, to
a projected $193 billion this year. It is expected that by 1999, the deficit will fall
to its lowest level as a percentage of GDP since 1979. These indicators demonstrate,
I believe, the continued wisdom of reducing the deficit without haphazardly cuttin,

rograms which have proven to be effective in helping all Americans find new an
Petter jobe—-including disadvantaged youth, dislocated workers, and other groups in
need of job training assistance.

‘These investments have traditionally been bipartisan. Recognizing the need to in-
vest resources to promote lifelong learning the 103rd Congress enacted, with biparti-
san support, systems to enhance job opportunities for those entering the workforce
and those sccking new jobs. The School to-Work Opportunities Act promotes nation.
wide innovations in youth apprenticeships, which are especially important to low-
income kids who frequently Rave little contact with the job market and often drop
out of school. The creation of One-Stop Career Centers is transforming the unem-

loyment system into a customer-driven reemployment system where state and local
lnstitutions are customizing the design and operation of these operations to meet
their needs.

Transforming Job Training

The next step along the path to reform the existing array of job training pro-
grams—with their confusing requirements and bureaucratic barriers—is contained
in the Administration’s Middle Class Bill of Rights proposal. This proposal offers
every American a chance to learn the skills needed to burid a better fatore by put-
ting resources directly into workers’ hands so they can gain skills at the time, place
and in the manner which makes sense to them—a plan very similar to the operation
of the original G.I. Bill. The proposed new system focuses on workers, job seekers,
labor market information, state and local flexibility, private sector partnerships and
accountability. The G.I. Bill for America’s Workers will replace the outmoded and
confusing maze of federal job training programs by consolidating 70 job training pro-
grams. Many of these existing pi s were designed to address @ specific concern
at a specific time but were never aligned with other programs.

For adults, skill grants of up to $2,620 will be offered to low-income and dis-
located workers. Services will be provided through One-Stop Career Centers offering
easy access to reliable, up-to-date information on where jobs exist, what skills are
in demand, and the performance records of training institutions. For youth, reforms
started under the School-to Work Opportunities Act will intensify. Work-based
learning will be integrated with school-based learning for high-risk youth. Second
Chance rants will empower local institutions to manage resources to assist youth
likely to have the most difficulties in making a successful transition into stable em-
ployment and a career path. Disadvantaged youth need practical, effective opportu-



100

Contract Compliance in the Department of Labor. They have some-
what different mandates and somewhat different tools for enforce-
ment, so I’m not sure whether they should be combined or not.

Mr. Towns. Thank you.

Are there advantages of a federally administered employment
and training program? Are there advantages to have that kind of
arrangement?

Mr. BARNow. I would agree with what Mr. Crawford was saying,
that it is very important that we have accountability in the system,
and I would be concerned about if we moved to either a block grant
or a voucher system, that if we abandon the Federal Government
collecting the data and trying to see how effective the programs
are, we will just—we won't know how well we are doing and we
won't know if the taxpayers’ money is well spent and we won't
know which programs are working better than others. That would
worry me a lot.

So I would stress the importance of the Federal role in oversight,
monitoring, and accountability.

Ms. NIGHTINGALE. If I could add to that also, I think that the
Federal role in employment and training has historically been to
help the disadvantaged and the role of the Federal Government in
targeting on those who are least likely to have informal networks
for education. Identifying education opportunities, job training, and
labor market information has been the mission of the Federal job
training programs in general, and although there is some need for
increasing flexibility at the State and local level we need to balance
that with some accountability for targeting on the most disadvan-
taged, and I would think that continues to Ee the Federal role.

ir. TOWNS. May I ask one more question?

Mr. SHAYS. Certainly.

Mr. Towns. I know my light is on.

Let’s just switch roles for a moment, switch seats. How might
Congress ensure that Federal standards of accountability are pre-
served in a block grant approach? How can we do that?

Mr. BaRNow. I guess I could take a crack at that. If we had a
block grant type program, we could still require the States to re-
port data back to the Federal Government on who is served, on
what the outcomes are, similar to what we have now. I mean I
think these things are a matter of degree in terms of how much
flexibility we would give and who would do the oversight, but we
would still require that uniform standard data be reported to the
Federal Government so that we could compare the programs and
see what the return on the investment is.

Ms. NIGHTINGALE. I think also that we may be at a point where
we are rethinking what the role of the Federal agencies should be,
and we may be in need of a stronger Federal agency role in provid-
ing technical assistance to the States and helping to develop the
kind of data systems that Dr. Barnow was talking about.

There is a need for local capacity building, and the Federal Gov-
ernment—the Federal agencies can play a role there as well, and
one of the things that we have learned through previous block
grants is that we haven’t done very well in making sure that ac-
countability is assured and that particularly disadvantaged individ-
uals are receiving an equitable amount of the services and that


4l

with such workplace responsibilities as safety and health, from issuing necessary,

common sense regulations.

Is there still room for improvement? Of course. That’s why the Department of
Labor is continuing to engage in a rigorous, methodical review of ite mission and

operations.

‘This concludes my prepared remarks. I would be happy to answer any questions.

1950 to 1978
Real Famity ncome Growth By Quiatile

Bottom 20% Second 20% Middle 20% Fourth 20% Top 20%
138% .. 98% 106% 11% 99%
‘SOURCE: Bureau of the Census Department ot Commerce. All data convened to 1993 dollars.
1979 to 1993—-Growing Apart
Real Family income Growth By Quiatile
Bottom 20% Second 20% Middle 20% Fourth 20% Top 20%
-% 8% 3% 5% 18%

‘SOURCE: Bureau of the Census, Department of Commerce. All data converted to 1993 dollars